Vi7
DEGREES OF CHANGE
Steps Towards an Ontario
Global Warming Strategy
Prepared for:
Ontario Ministry of Energy
Ontario Ministry of the Environment
by:
Ontario Global Warming Coalition
lOJo^JRI
Ontario
Degrees of Change:
Steps Towards an Ontario
Global Warming Strategy
Prepared for the
Ontario Ministry of Energy
and the
Ontario Ministry of the Environment
by the Ontario Global Warming Coalition
Canadian Environmental Law Association
Energy Action Council of Toronto
Friends of the Earth
Greenpeace
National Energy Conservation Association
Northwatch
Nuclear Awareness Project
Pollution Probe
Sierra Club of Eastern Canada
Solar Energy Society of Canada
June 1991
This report is published for the information of the general public
The mmistnes do not warrant the accuracy of its contents and cannot
guarantee or assume any liability for the effectiveness or economic
benefits of the devices and processes descnbed m the report.
Pour tout renseignement touchant cette publication,
veuillez communiquer avec to mmistere de I'Energie de I'Ontano
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56, rue Wellesley ouest
Toronto (Ontario) M7A 2B7
Tel: (416) 327-1234
Pour les appels intenjrbains sans frais,
1-800-ENERGY1
ACKNOWLEDGEMENTS
The co-authors of the report include: Philip Jessup, energy policy advisor to Friends of
the Earth and principal author and editor of the report; Bruce Lourie, EMC Partners, Ltd., who
researched and wrote the chapters on industry and the case study of iron and steel; Mary
Macdonald, President, Venture Economics Canada, who wrote the chapter on industrial strat-
egy; Zen Makuch, Counsel, Canadian Environmental Law Association, who wrote the chapter
on utility reform, and; Marcia Valiante, Canadian Institute for Environmental Law and Policy,
who contributed to the regulatory strategy in the industry chapter. Barbara Warner, an intern
with Canadian Environmental Law Association, contributed research to the chapter on trans-
portation.
The co-authors are grateful for the efforts of many people who assisted in the produc-
tion of this report. The advisory committee was chaired by Kathy Cooper, and its members in-
cluded Mario Kani, John Bennett, Doug Fraser, David McRobert, Kai Millyard, Judith
Ramsay, and Tonv Woods. The project would not have been possible without their active par-
ticipation and input. A special sub-committee of the Solar Energy Society of Canada chaired by
Doug Hart submitted very useful information and insights, and several meetings with Greg
Allen and his staff at Allen Associates clarified many technical points in the residential and
commercial chapters. Dr. Danny Harvey reviewed the presentation of scientific information and
offered helpful suggestions. Jack Gibbons participated in meetings and helped refine the utility
reform chapter, and Marion Fraser contributed valuable information from Ontario Hydro's per-
spective. Staff of the Ministry of the Environment and the Ministry of Energy submitted edito-
rial as well as analytical comments that helped strengthen the report. Special thanks to Giles
Endicort, Ian Leung, Larry Moore, Duncan Taylor, and Rusty Chute.
The principal author would especially like to acknowledge the assistance of the
Honourable Mira Spivak, whose research support made possible the quantitative analytical
aspects of the project.
FOREWORD
This report, Degrees of Change: Steps Towards an Ontario Global Warming Strategy,
was commissioned by the Ontario Ministries of Energy and Environment as part of a wide-
ranging consultative effort to develop policy on the global warming issue.
The report is an advocacy document which represents the analysis and judgment of a
ten-member team of environmental groups, the Ontario Global Warming Coalition. Prompted
by convincing evidence that greenhouse gas emissions represent an impending threat to the
natural environment, the report argues that significant economic, political, and social changes
are required in Ontario to help reverse the threat of global warming.
Underlying the report's conclusions are optimistic assumptions about the economic and
technological potential of measures to avert future environmental damage in Ontario. These as-
sumptions may be justified in the face of scientific warnings which tell us that the way we live
in Ontario — and the biological foundation for life itself — are already imperiled by global
warming.
It is not a question of whether dramatic change is realistic. Dramatic changes in our cli-
mate are already beginning to reshape our future. The question which confronts us is: do we
change by default or by design?
The report is a welcome contribution to the public discussion on developing a strategy
on global warming. The Global Warming Coalition has provided a thoughtful and challenging
set of insights.
Sincerely,
fenny Carter, Ruth Grier,
Minister of Energy Minister of the Environment
CONTENTS
CHAPTER 1 — Introduction and Overview 1
1 .0 Background *
1 .2 What is the Toronto Target? 2
1.3 Recent Scientific Concerns 2
1 .4 Rationale for an Ontario Global Warming Strategy 3
1 .5 Framework and Methodology 6
1 .6 Forecasting Provincial C02 Trends 9
CHAPTER 2— Residential Sector 14
2.0 Introduction 1 4
2. 1 Profile of C02 emissions 14
2.2 Profile of Energy Intensity Trends 15
2.3 Opportunities for CO2 Reductions 16
2.4 Measures to Reduce C02 Emissions 20
2.5 Barriers to Achieving Measures 21
2.6 What Ontario Can Do 22
2.7 Economic and Social Implications 26
CHAPTER 3 — Commercial Sector 28
3.0 Introduction 28
3.1 Profile of C02 Emissions 28
3.2 Profile of energy intensity trends 29
3.3 Opportunities for C02 Reduction 30
3.4 Measures to Reduce C02 Emissions 33
3.5 Barriers to Achieving Measures 34
3.6 What Ontario Can Do 34
3.7 Economic and Social Implications 37
CHAPTER 4 — Transportation Sector 39
4.0 Introduction 39
4. 1 Profile of C02 Emissions 39
4.2 Profile of Energy Intensity Trends 40
4.3 Opportunities for C02 Reduction 41
4.4 Measures to Reduce C02 Emissions 45
4.5 Barriers to Achieving Measures 45
4.6 What Ontario Can Do 46
4.7 Economic and Social Implications 52
CHAPTER 5— Industrial Sector 54
5.0 Introduction 54
5.1 Profile of C02 Emissions 55
5.2 Profile of Energy Intensity Trends 56
5.3 Opportunities for CQz Reductions 57
5.4 Measures to Reduce C02 Emissions 59
5.5 Barriers to Achieving Measures 61
5.6 What Ontario Can Do 62
5.7 Economic and Social Implications 66
CHAPTER 6— The Iron and Steel Industry 67
6.0 Introduction 67
6.1 Rationale for Profiling the Steel Industry 68
6.2 Profile of Energy Use 68
6.3 Profile of C02 Emissions 70
6.4 Opportunities for CO2 Reduction 70
6.5 Barriers to the Introduction of Efficiency Improvements 73
6.6 Review of U.S. Clean Air Act Provisions for Coke Ovens 74
6.7 An Integrated Approach to Best Available Technology 74
6.8 Policies and Measures for Ontario's Steel Industry 75
6.9 Savings Summary 76
6.10 Economic and Social Implications 77
CHAPTER 7— A Global Warming Industrial Strategy 78
7.0 Introduction 78
7.1 Diesel Cogenerators and Fuel Cells 78
7.2 The Role of the Entrepreneurial Company 79
7.3 Atlas Polar 80
7.4 Ballard Technologies 81
7.5 Capitalizing on the Opportunity Access to Capital 82
7.6 Specific Initiatives For Consideration 84
7.7 Conclusion 87
CHAPTER 8— Role of Energy Utility Reform 89
8.0 Introduction 89
8.1 Key Elements of Successful Demand-Side Programs 89
8.3 The Ontario Energy Board 92
8.4 Proposals Which Rely Upon Existing Regulatory Tools 93
8.5 Amendments to the Power Corporation Act (PCA) 94
8.6 Need for a Comprehensive Ontario Energy Plan 95
8.7 An Energy Conservation and Renewable Energy Utility 95
8.8 Conclusion 97
CHAPTER 9 — Summarv and Conclusions 98
9.0 Summary of C02 Reductions 98
9.1 Priority Measures and Policies 100
9.3 Implications for the Nuclear Moratorium 101
9.4 The Role of Energy Prices 1 02
9.5 Need for a Provincial Global Warming Industrial Strategy 1 03
9.6 Need for Utility Reform 1 05
9.7 Conclusion 106
APPENDIX A— Ministry of Energv Data 1 04
Table A- 1: Ontario Energy Use. 1988 (PJ) 109
Table A-2: Ontario CO, Emissions, 1988 (Mt) 109
Table A- 3 : On lario Energv Use, 2005 (PJ ) 110
Table A-4: Ontario C02 Emissions, 2005 (Mt) 110
APPENDIX B— Residential Sector Ill
Table B-l: Summary of CO; Reduction Measures in Residential Sector 1 12
Table B-2: Residential Energy Consumption (base case), 1988-2005 113
Table B-3: Residential Energv Consumption (efficiencv), 1988-2005 1 14
Table B-4: Residennal Energy (fuel switch), 1988-2005 1 15
Table B-5: Residential Energy (renewable), 1 988-2005 116
Table B-6: Residential CO; Emissions (base), 1988-2005 117
Table B-7: Residential C02 Emissions (efficiency), 1988-2005 118
Table B-8: Residential C02 Emissions (fuel switch), 1988-2005 119
Table B-9: Residential CO; Emissions (renewable), 1988-2005 120
Table B-10: Breakdown of Energy Intensity and
New Dwellings, 1989-2005 121
Table B- 1 1 : CO; Reduction Scenario for New Single Family Residential 121
Table B-12: Summary of Changes in Residential Electricity Use, 1988-2005 ....122
APPENDIX C— Commercial Sector 123
Table C- 1 : Energy Intensity by Category of Building, 1988 1 25
Table C-2: Estimated New Commercial Floor space, 1989-2005 125
Table C-3: Energy Demand Shares by Function & End Use in Existing
Buildings, 1988 126
Table C-4: Energy Use in Existing Commercial Buildings, in 1988 126
Table C-5: Energy Demand by Function & End Use in New Buildings
Constructed 1989-2005, in 2005 127
Table C-6: Energy Use in New Buildings Constructed 1989-2005, in 2005 127
Table C-7: C02 Emissions for Existing Commercial Buildings, in 1988 128
Table C-8: CO2 Emissions for Existing Commercial Buildings
(Efficiency scenario), 2005 128
Table C-9: CO; Emissions for Existing Commercial Buildings
(Fuel switch scenario), 2005 129
Table C-10: CO; Emissions for Existing Commercial Buildings
(Renewable scenario), in 2005 1 29
Table C-ll: CO; Emissions New Buildings Built 1989-2005, 2005 130
Table C-12: Summary of CO2 Reduction Measures in Commercial Sector 124
TableC-13: Summary of Changes in Commercial Electricity Use, 1988-2005... 124
APPENDIX D— Industrial Sector 131
Table D- 1 : 1988 Base Energy Consumption 1 34
Table D-2: 2005 Energy Consumption with End Uses 135
Table D-3: 2005 Energy Consumption with Efficiency Measures 136
Table D-4: 2005 Energy Consumption with Added Fuel Switching 137
Table D-5: 2005 Energy Consumption with Renewable Energy 138
Table D-6: 2005 CO; Projections 139
Table D-7: Industrial Electricity Demand Forecast 140
APPENDIX E— Transportation Sector 141
Table E-l: Estimate of GTA Vehicle Kilometres Travelled (weekdays) 143
Table E-2:Vehicle Mileage Forecast 143
Table E-3: Energy Use bv Passenger Vehicles, 1988-2005 144
Table E-4: CO; Emissions from Passenger Vehicle Use, 1988-2005 145
Table E-5: Summary of CO; Reduction Measures 142
Table E-6: Estimate ofTTCCO; Emissions, 1988 142
APPENDIX F— Electricity Generation 1 45
Table F-l: Change in Electricity Demand, 1988-2005 145
Table F-2: Electricity Forecast, Fuel Mix, and CO; Emissions, 2005 146
NOTE ON ENERGY CONVERSION
Different fuels and forms of energy often are measured in different units.
Electricity is counted in kilowatt- hours (kWh), for instance, coal in British
thermal units (Btu), and natural gas in cubic feet (ft3). For convenience and
purposes of comparison, a common unit of energy is mostly used in this re-
port— the "joule". Hence, the energy used for a house is described in units
of gigajoules (GJ) per household, or billion joules, and includes an inven-
tory of electricity, natural gas, and oil consumed by the household-
Equivalency is as follows:
1 watt-hour = 1 joule/second x 3,600 seconds or 3,600 joules
1 kWh = 3,600,000 joules or .0036 gigajoules (GJ)
or
1 GJ = 278 kWh
1 PJ = 277,777,777 kWh
The prefixes used in this report include the following:
Prefix
S\mbol
Power
Number
kilo
k
103
thousand
mega
M
10*
million
giga
G
109
billion
tera
T
1012
trillion
peta
P
1015
quadrillion
For example, the coal-fired generating units at Ontario Hvdro's Nanticoke
power plant, rated at 542 MW, each typically generate 4,300,000.000 kWh
annually operating at 90 percent capacity, the equivalent of 15 PJ.
Another example: the average Ontario house uses 140 GJ or the equivalent
of 38,700 kWh annually.
CHAPTER 1— INTRODUCTION AND OVERVIEW
"Humanity is conducting an unintended, uncontrolled, globally pervasive
experiment whose ultimate consequences could be second only to a global
nuclear war."
Final statement of the Toronto Conference on "The Changing
Atmosphere: Implications for Global Security" (June 1988)
1.0 Background
In March. 1990, the Ontario government released Global Warming: Towards a Strategy
for Ontario, a Cabinet document which proposed that the province — as a first step in its effort
to address the problem of global warming — reduce emissions of greenhouse gases, especially
carbon dioxide (CO? ), so that "levels by the year 2000 are lower than in 1989".1 The release of
the document was accompanied by a workshop for environmental organisations on global
warming sponsored by Friends of the Earth and Greenpeace and funded by the Ministry of
Energy. The Ontario Global Warming Coalition was founded at the workshop to facilitate fur-
ther consultation among environmental groups, government, and other stakeholders on the is-
sue.
Environmental groups faulted the government's proposed global warming strategy for
several reasons.2 In their view, the strategy:
• failed to seriously consider a 20 percent cut in carbon dioxide emissions by 2005 from
1988 levels, otherwise known as the "Toronto target";
• outlined only broad, piecemeal strategies that lacked rigorous measures for reductions
of carbon dioxide emissions in the residential, commercial, transportation, and indus-
trial sectors;
• did not sufficiently address the market and institutional barriers to energy conservation,
renewable energy, and non-utility generation.
The election of a new government has created a pause in the policy-making process and
the opportunity to formulate a more deliberate provincial strategy. As a pan of the process, the
Coalition sought and received support from the Ministries of Energy and Environment to for-
mulate a reasoned case that the "Toronto target" can be achieved in Ontario, if the government
pursues a full range of appropriate policy measures. An advisory committee of environmental
groups was established to guide the study and, meeting over a period of two months, its mem-
bers consulted among themselves and with representatives from government to discuss options
to reduce CO2 emissions. Other greenhouse gases are not considered.
This report is the outcome of that process. It offers:
a survey of the most promising policy measures and technologies to reduce carbon
dioxide emissions; estimates of their potential to reduce provincial carbon emissions;
and discussion of the primary market and institutional barriers to their achievement, as
well as proposal of reforms needed to overcome such barriers, especially in Ontario's
regulation of utilities;
an assessment of the implications of the measures with respect to their cost effective-
ness, the institutional changes necessary to successfully implement the measures, and
their potential impact on the province's technology base and employment;
• a case study that identifies opportunities for commercializing new natural gas cogenera-
non technologies in Ontario that could be used to reduce carbon emissions and suggests
new policies to help the province capitalize on its global warming strategy by encourag-
ing the growth of new businesses and jobs connected with such technologies.
1.2 What is the Toronto Target?
The "Toronto Target" is a goal that was proposed to governments by scientists assem-
bled at The Changing Atmosphere Conference held in Toronto in June, 1988, as an interim
step towards a 50-60 percent global reduction needed to stabilize the concentration of CO; in
the atmosphere.3
Since the Toronto conference, the scientific rationale for the 20 percent target has held
up under intense scrutiny by national governments, international expert panels, and, most re-
cently, by the world community of meteorologists and energy experts gathered at the Second
World Climate Conference held in Geneva in fall, 1990. Many national, provincial, and munic-
ipal governments have made commitments to the target, including Toronto (the first city in the
world to do so) and neighboring states, New York and Vermont.
The Coalition recognizes that reaching the Toronto target will not be easy. Not only will
many fundamental changes be needed in the way energy is produced, distributed, and con-
sumed in the province, but many long-held attitudes will have to give way. Furthermore, the
province has little control over some social and economic forces that will affect future CO;
emission trends. These include population and economic growth. Such growth is near impos-
sible to forecast given the political and economic uncertainties that face Canada in the next few
years as it adjusts to the constitutional crisis, to the competitive challenges posed by free trade,
and to a world economy buffeted by the significant international capital flows likely to be di-
verted towards eastern Europe and the Middle East.
One fundamental change that will need to occur, for instance, is the widely held attitude
that cheap energy is good for us all. While energy is one of the essential elements of modem
industrial society, its increasing use poses one of the gravest risks to natural ecological systems
and human health, the Coalition believes. In Canada, the economic assessment of such risks as
one of the legitimate functions of the pricing of energy is not yet recognized as an aim of public
policy. It will be necessary to do so in order to allow non-polluting forms of energy, such as
solar, to compete fairly in the marketplace.
Change is never easy, especially when groups perceive their economic interests to be
adversely affected. Home builders may resist stronger energy efficiency provisions in the
provincial building code, in part, because they believe the additional costs incurred will put
their new homes at a competitive disadvantage with older homes that didn't have to meet such
standards. Auto companies may resist any measures to encourage the public to buy more fuel
efficient automobiles, because they believe such measures will constrain consumer freedom to
buy high performance vehicles, which typically provide higher profit margins than standard
vehicles. Oil companies will resist ethanol because it displaces their own fuels and additives
Ontario Hydro may resist the development of the full potential of energy efficiency, parallel
generation, and renewable energy because actually realizing such strategies implies a trend to-
ward decentralization at odds with its corporate culture. And governments, faced with opposi-
tion from special interests, may balk at formulating new regulations and programmes.
1.3. Recent Scientific Concerns
The year 1990 was a watershed in the evolution of scientific concern about global
warming. Global average surface temperatures based on land and marine measurements
reached an all-time high since records began in the middle of the 19th century. According to the
British Meteorological Office, the 1990 global mean was 0.39°C above the average during the
period 1951 to 1980.4 The U.S. National Aeronautic and Space Administration (NASA) re-
ported similar results from their global data sources.5
The warmth of 1990 was particularly evident over southern Canada, where some re-
gions experienced abnormally high temperatures, particularly in March. (Some regions of
Canada, however, experienced cooler weather compared with the 1951 to 1980 period, namely
northeastern Canada and the central Arctic.) While temperatures for one year are less significant
than trends over a period of years, the fact that 1990 was so warm in the absence of an El Nino
event— the periodic appearance of a warm current in the Pacific Ocean that typically warms
North America— makes the record breaking temperatures of 1990 more significant than they
would otherwise be.
Adding to the concern about temperatures was evidence that snow cover over Northern
Hemisphere land masses reached a 19-year low in 1990, nine percent below the 19-year mean,
with the most significant decreases occurring during spring.6 Snow is a key variable in the
global heat budget, since it reflects solar radiation back to space. As snow cover decreases in
The Northern Hemisphere, land and water masses will absorb more solar radiation and produce
more infrared radiation, heating northern countries like Canada up more than their southern
neighbors. Indeed, over the past 30 years, winter and spring mean temperatures in northern
Onrario have increased as much as 1.5°C, much more than the global average over the same
period.7 (See accompanying Environment Canada maps.)
Also consistent with the belief that a real warming of the climate is occurring is the re-
cent observation that sea ice has thinned by about 15 percent since 1976 over a broad region of
the Arctic, although there is no indication yet of a trend in ice area in either hemisphere.8
Heightened scientific concern about global warming culminated at the Second World
Climate Conference in Geneva in October 1990 in a far reaching consensus about the causes
and potential effects of global warming, and possible remedial policies to slow down the rate
and reduce the ecological risks of warming. In its final conference statement, scientists and en-
ergy experts attending the conference agreed that:
• without action to reduce emissions of greenhouse gases from human activities, global
warming is predicted to reach 2-to-5° C over the next century, a rate of change unprece-
dented in recorded human history, and the warming is expected to be accompanied by a
sea level rise of 30- to- 100 centimetres;
• a continuous world-wide reduction of net CO; emissions of l-to-2 percent per year
would be required to stabilize C02 concentrations in the atmosphere by the middle of
the next centurv;
• many studies conclude that technical and cost-effective opportunities exist to reduce
CCh emissions by at least 20 percent by 2005 in industrialised nations;
• industrialised countries must implement reductions even greater than those required, on
average, for the globe as a whole, in order to allow for growth in emissions from de-
veloping countries.
In sum, scientists sent a clear message to industrialised nations: significant emissions
reductions must begin now, and cost-effective opportunities are available to make them.
1.4 Rationale for an Ontario Global Warming Strategy
Can and how should Ontario respond to such concerns? The Coalition believes that the
Ontario government should make a commitment to reduce emissions of CO; — the most impor-
Ul
OE
Puj
<CZU
5al
tant greenhouse gas — by 20 percent from 1988 levels by 2005, as an interim step towards
eventual reductions of 50-60 percent by 2010-2020, which are eventually needed to stabilize
concentrations of greenhouse gases in the atmosphere.
Such an effort is justified for several reasons. First, Ontario's economy, people, and
wilderness areas are likely to be significantly affected by global warming, many in adverse
ways, reason enough for the province to undertake a serious CO; reduction effort. Second,
Ontario's leadership, acting in concert with other local provincial and state governments around
the world, can make a difference in spurring national governments to take action. Finally, a
major effort to reduce the energy intensity of the province's economy and reduce CO; emission
over the next 15 years would create important new opportunities for technological and eco-
nomic advancement, ranging from the production of energy efficient appliances and equipment
to the development of new energy supply technologies, such as cogeneration systems.
REGIONAL EFFECTS OF GLOBAL warming. How will global warming affect
Ontario's economy and natural resources? The regional effects of global temperature changes
are difficult to assess because the computer simulations undertaken by climate models are
rudimentary and are likely to remain so for many years. While the results of climate modeling,
therefore, need to be treated with caution, studies recently commissioned by Environment
Canada of the potential regional effects if atmospheric CO; doubles suggest that adverse effects
may outweigh positive ones in Ontario:
• Great Lakes — while the reduction in the mean length of the ice season will increase the
marine shipping season, net basin supply from runoff of water from the region's wa-
tershed will decline by 10-20 percent which, combined with increased evaporation and
greater consumptive uses, will lower lake levels, adversely affecting shipping, wet-
lands, and hydro capacity at Niagara Falls.9
Agriculture — a warmer climate may benefit agriculture in a number of ways, such as an
extension of the growing season in northern Ontario and the beneficial response of
crops to higher concentrations of atmospheric CO;, but there is, nevertheless, a risk of
significant crop failures in the southwestern pan of the province due to increased
moisture stress on crops, with corn and soybeans becoming particularly risky should
droughts become more frequent.10 In addition, there is the possibility of significant
crop damage stemming from higher ground-level ozone levels during summers.
Tourism and recreation — declining lake levels and disappearing wetlands will eliminate
the tourism and recreation associated with parks such as Point Pelle on Lake Erie, and
the downhill ski season in the South Georgian Bay region could be eliminated along
with $39 million in skier spending; summer recreational activities, however, would
likely enjoy extended camping seasons at provincial parks.11
Urban air quality — warmer summers will mean greater urban smog, since the formation
of smog is dependent not only on the presence of certain air pollutants emitted by auto-
mobiles, power plants, and industries, but also temperature. Rising ozone levels will
cause increasing pulmonary damage among people living in urban areas, and indirt\
contribute towards the formation of acids in the air that further harm human health.
Forests — For each 1°C of warming, tree ranges have the potential to expand 100 kilo-
metres northward, and the potential northward shift of the boreal forest climate
(southern boundary) could range from 250 to 900 kilometres. But the northward shift
in climate would likely occur more rapidly than the species can migrate. Hence higher
temperatures, lower soil moisture, and more frequent drought conditions will place
greater stresses on forest resources leading to greater damages from pests, disease, and
wild fires and major dislocations of supply.12 In 1989 alone, close to one percent of the
province's total forest land burned from wild fires as a result of drought conditions, a
possible harbinger of the future.13 Since forest planning and policy development as-
sumes a 50-100 year horizon, the minimum rotation ages of most eastern Canadian tree
species, the potential rapidity of climate change compels, at the very least, a re-exami-
nation of present forest management policies.14
The most significant ecological impact of global warming on Ontario's natural re-
sources may be the effect of rising temperatures on the Hudson Bay Lowlands that cover
32,000 square kilometres of northern Ontario, as well as Manitoba, and Quebec. As the second
largest continuous wetland region of the world, after the Siberian peatland of the U.S.S.R.
(see accompanying map), these wetlands are significant because they become net producers of
methane and other greenhouse gases when they warm up, as they are composed of a significant
fraction of water saturated organic matter.
FYeliminary research from the Northern Wetlands Study, a joint investigation being un-
dertaken by Canadian universiues and NASA, indicates that these wetlands are quite sensitive
to changes in temperature and could be expected to add significant loadings of greenhouse
gases, especially methane, to atmosphere as the northern hemisphere warms up.15 This is
known as a "positive feedback", i.e., terrestrial effects of global warming that amplify the
warming trend even further.
In sum, the implications of global warming for Ontario's economy and natural re-
sources— especially forests, soils, and the Great Lakes watershed — may be potentially very
significant, not only disrupting economic benefits obtained presently from these resources but
increasing future loadings of greenhouse gases to the atmosphere resulting from positive feed-
backs.
NATIONAL AND international LEADERSHIP. Can Ontario, acting alone among the
provinces and territories, make a difference? While the province produces only about one per-
cent of global CO; emissions, it produces roughly a third of Canada's emissions. At present,
Canada and the U.S. are alone with Turkey among the nations belonging to the Organisation
for Economic Co-operation and Development (O.E.C.D.) refusing to take significant steps to
curb global warming. While two federal Environment Canada ministers have made a commit-
ment "to stabilize Canada's CO; emissions, the Green Plan's National Action Strategy for global
warming would only stabilize net emissions, allowing tree planting to offset future rising CO;
emissions.16 So Canada's present policy occupies a retrograde position from previous com-
mitments.
In the Coalition's view, a serious commitment by Ontario to reducing CO; emissions
would be a positive challenge to the federal government and other provinces, and it would
surely spur forward action on this issue. Indeed, the province and municipal governments ac-
tually have a great deal more jurisdiction and authority to carry out policies to reduce CO; than
the federal government. The keys to such a strategy lie in provincial rulemaking under the
Energy Efficiency Act, the provincial building code, and the Clean Air Program (CAP), as well
as joint jurisdiction with municipalities over transportation and land use planning. The province
also has the means to effect changes in the market for new technologies that can reduce CO;, as
well as the authority to introduce structural reforms of electricity and gas utilities that would en-
courage greater energy efficiency and use of renewable energy technologies.
opportunities for industrial renewal. Finally, the recession, terrible as it is
for Ontario, presents the new government with important opportunities for restructuring the
economy to make it more competitive in international markets. The initiatives needed to imple-
ment a provincial global warming strategy — energy efficiency and renewable energy — can help
foster such a needed industrial renewal. Some industries heavily reliant on primary energy,
such as iron and steel, will need to improve energy efficiency to reduce factor costs in order to
remain competitive. Other sectors, such as agriculture, forestry, and light manufacturing will
benefit significantly from a provincial commitment to develop renewable energy resources,
such as the production of ethanol from starchy crops or woody biomass, high performance
windows, solar hot water heaters, and a large variety products that enhance the thermal per-
formance of buildings.
Recent studies of international competitiveness show that the nations with the most rig-
orous environmental standards often lead in the export of the affected products. Germany, for
example, has long had perhaps the most stringent stationary air pollution requirements, and
German companies now appear to hold a world wide lead in patenting and exporting air pollu-
tion control equipment.17 With respect to global warming, Germany has now gone the furthest
among industrial nations in its commitment to a 25 percent CO; reduction target by 2005. It
comes as no surprise, then, that Germany has mounted an industrial initiative to ensure its
world leadership in the manufacture of photovoltaic technologies, which will play a role in
meeting the target. It assisted Siemens to acquire ARCO Solar in 1990, which has developed
the leading contender for low-cost, thin film technologies ready to be commercialized in the
1990s.
There is no reason why Ontario cannot do the same. While at first exacting standards
may raise costs and make firms less competitive, if properly formulated they will encourage in-
novation and the re-engineering of technology. The result eventually will be lower costs, and
new products and processes that can be exported. Chapter 7 explores these themes in greater
detail.
In sum, the Coalition believes a strong provincial policy on global warming makes
sense. Such a policy would not only be in the province's long-term ecological and economic
interests, but consistent with new policy initiatives such as the nuclear moratorium and new en-
ergy efficiency programmes. In addition, the province will be in a better position to influence
the direction of the issue nationally (if not internationally) in the years ahead.
7.5 Framework and Methodology
This report explores the measures and policy strategies that would be required to
achieve a 20 percent reduction in CO? emissions in Ontario by 2005. Since the Ministry of
Energy projects that C02 emissions will rise about 21 percent by 2005, the 20 percent cut ac-
tually represents a 43 percent cut from emissions forecast for the year 2005. 18
The report's analysis starts with the Ministry of Energy's estimates of primary and sec-
ondary energy use and CO; emissions for 1988 and 2005, as shown in tables included in
Appendix A. fable 1 summarizes the Ministry's estimates for Ontario's CO; emissions in 1988
and 2005. Key assumptions of the Ministry's forecast include:
average economic growth during the 1989-2005 period of three percent per year,
average energy demand growth of 1.9 percent per year for all sectors, 2.6 percent in the
industrial sector, and
an implied built-in reduction in energy intensity averaging 1.1 percent per year.
In the Ministry's assumptions, electricity demand growth will be met by the Darlington
nuclear station; 2,000 MW of non-utility parallel generation, of which 200 MW is hydraulic
and 1,800 MW natural gas cogeneration; and a mix of new Ontario Hydro supply based on its
proposed plan, which includes new nuclear power stations. The result is a decline by half in
the CO; electricity emissions rate by 2005 from its level in 1988, which explains the 25 percent
reduction in CO; forecast emissions in this sector.
Table 1 (a): Ministry of Energy Summary of Ontario's C02emlsslons,
1988 and 2005
1988 2005
co2
%
co2
%
% change
Sector
(Mt)
share
(Mt)
share
1988-2005
Residential
19.0
12%
19.4
10%
+2%
Commercial
10.8
7%
12.8
7%
+ 19%
Industrial
50.1
30%
74.8
38%
+49%
Transport
42.4
26%
54.9
28%
+30%
Non-energy
0.8
1%
1.7
1%
+ 113%
Own uses and losses
8.9
5%
10.7
5%
+20%
Electricity generation
32.3
20%
24.1
12%
-25%
TOTAL
164.3
1 00%
198.4
1 00%
+21%
See Appendix A (or detailed breakdown.
Another way to view the province's C02 emissions is to proportionately factor emis-
sions from own "uses and losses" and "electricity generation" into each of the end-use sectors.
While this approach oversimplifies matters somewhat — different sectors demand electricity in
different time patterns and fuel mixes, for instance — it does give a more realistic snapshot of
the contribution the different secondary energy end-uses make to CO; emissions in a specific
year. Viewed this way, energy consumption by Ontario's residential and commercial buildings
is responsible for almost a third of the province's CO; emissions, industries somewhat more
than a third, and transportation somewhat less than a third.
Table 1 (b): Consolidated Summary of Ontario's C02 emissions, 1988
1988
C02
C02
%
Intensity
Sector
(Mt)
share
(tonnes/MJ)
Residential
30.5
18%
37
Commercial
21.2
13%
33
Industrial
64.2
39%
49
Transportation
46.3
28%
69
Non-energy
2.6
2%
10
TOTAL
164.8
100%
44
In this report, three strategies are examined in each of the end-use sectors: energy effi-
ciency, fuel switching, and renewable energy measures.
• Energy efficiency. Strategies include retrofit of buildings and industries with mea-
sures to improve' thermal and electrical efficiency, as well as modifications in the
provincial building code that require future buildings to be less energy intensive. In
addition, various market-based incentives and educational initiatives are examined to
encourage consumers to purchase more energy efficient vehicles and homes.
• Fuel switching. Since burning natural gas produces less C02 than burning other
fossil fuels, various measures are examined to encourage wider use of natural gas
especially for space and water heating and use as a motor fuel, substituting for oil and
coal-fired electricity generation.
• Renewable energy. Strategies include wider use of passive and active solar heating
in buildings, substitution of ethanol for gasoline in a blended motor fuel, and harvest-
ing wood on a sustainable basis to ensure that it is a renewable energy source.
measures economically attractive TO society. The Coalition identifies se-
lective measures to reduce CO; emissions it deems "economically attractive to society" in each
sector in Chapters 2-6, based on a survey of the pertinent literature and interviews with energy
efficiency and renewable energy experts. The measures are not meant to be comprehensive.
Indeed, a number of options with significant potential for abating CO; emissions, such as
waste reduction and recycling, were not addressed due to limited time and funds.
The report does not give a rigorous quantitative definition for "economically attractive
to society", nor does it estimate the capital costs of the measures, which would have been
beyond the scope and funding provided for this project. Defining "economically attractive"
isn't easy, especially when the many federal, provincial, and private studies reviewed differ so
widely in their assumptions about future energy prices, discount levels, and other technical de-
tails. The choice of discount level, for instance, significantly affects the economics of an in-
vestment, with low rates favouring heavily capital intensive options, such as nuclear reactors.
The selection of the rate in forecasts or commissioned studies may tend to reflect the priorities
or interests of the agency sponsoring the forecast or study.
Differing perspectives on "payback" also confound the definition of what is
"economic". Many industries won't accept more than a two year payback on energy efficiency
measures in a local factory, because they may be able to invest their capital in another enterprise
or country at a higher rate of return. On the other hand, a home owner, who cannot pass en-
ergy costs on to someone else, may be willing to accept a longer payback period. Indeed, a
home owner may even be willing to make "irrational" investments that are not economic on pa-
per, but that meet other needs.
Assessing the economic costs and benefits of measures is also tricky because true cost
effectiveness would measure only the costs of interventions taken solely to reduce CO; emis-
sions. In practice this is nearly impossible since many of the actions required to reduce CO;
emissions will also contribute positively to the attainment of many other environmental or so-
cial goals, such as the abatement of urban smog (substitution of natural gas), alleviation of
traffic congestion (modal shift to public transit), or the improvement of the health of the
province's farm economy (shift to ethanol as a transportation fuel). Furthermore, even if a
framework for the assessment of multiple benefits could be formulated, monetizing environ-
mental risks and benefits remains a difficult business.
On the other hand, economic analysis can be a valuable tool in assessing the relative
costs and benefits of different measures, enabling government to design a least-cost policy ap-
proach and to prioritize measures.
The analysis of the potential reduction in CO; emissions that implementation of such
measures could bring starts with the base data given in Table Kb), consolidating emissions
from own uses and losses and electricity emissions in each of the four end-use sectors.
Detailed analysis of measures applied in each sector is provided in Appendices B-E. The effect
of the measures on electricity demand in each sector are noted and consolidated in Appendix F,
which discusses the implications of those changes on the fuel mix and the CO; emissions rate
from electricity in 2005.
CAVEATS. The analysis in this report covers about 75 percent of the Province's emis-
sions inventory. The sectors that do not receive complete coverage are the commercial and
s
transportation sectors. In the commercial sector, the category of "other" commercial space, 31
percent of the sector in the Ministry of Energy's inventory, is omitted because of the lack of
adequate information on it. In the transportation sector, the analysis focuses on energy use by
passenger automobiles, close to 50 percent of the sector, because time and resources did not
permit adequate investigation of the truck, marine, and air transportation modes.
In the industrial sector, our analysis assumes the previous 20-year energy demand
growth rate, 2.1 percent, instead of the rate forecast by the Ministry of Energy in its projec-
tions, 2.6 percent. (During the course of this study the Ministry revised its reference case fore-
cast downward.) The reasons for our assuming a different growth rate are explained in the next
section.
Distinguishing an efficiency improvement factor — energy conservation that occurs
"naturally" in response to prices and to available incentives — is more difficult to do in the in-
dustrial sector, where growth often results from increased utilization of existing capacity. In
other sectors, the energy characteristics of new units of housing, office buildings, or passenger
cars can be identified and enumerated more easily. Such an analysis in the industry sector was
beyond the scope of this effort. Our simplified assumption that energy demand growth in the
industrial sector will approximate the historic trend, therefore, assumes some imbedded energy
conservation. As a result, care should be taken in reviewing the efficiency measures presented
in the industrial sector, as there is no doubt some "double-counting" among the specific mea-
sures discussed, such as installation of energy efficient motors, and the conservation embedded
in future growth.
With such caveats in mind, our analysis, through a survey of the literature, does at-
tempt to evaluate those measures that pay back in a reasonable period of time from a societal
point of view. The assumption is made, of course, that studies conducted in other jurisdictions
are relevant to Ontario. Other long-term ancillary benefits, such as support for new industries,
job growth in Ontario, or reductions in urban smog, are also weighed where appropriate.
1.6 Forecasting Provincial C02 Trends
If it weren't for population and economic growth, achieving the Toronto target by 2005
would not be difficult. The relative difficulty of achieving the target really stems from our esti-
mation and perception of how much growth is forecast over the next 15 years.
Trends in the province's emissions of greenhouse gases such as CO2 are especially
connected to (i) trends in economic growth and energy intensity, and (ii) weather, as expressed
as annual degree days and as annual precipitation in key watersheds that supply the province
with hydraulic energy. While it is beyond the scope of this report to explore these trends in de-
tail, an overview is provided as an introduction to the sectoral chapters that follow and to em-
phasize the perils of determining a course of action on global warming based on forecasting.
The more the economy expands (or contracts), the more (or less) energy it requires. On
the other hand, the relative extent to which economic growth and energy demand are linked is a
function of energy intensity, or the amount of total primary energy requirement associated with
a dollar of gross domestic product (GDP). (Energy intensity can also be expressed in different
sectors of the economy as energy per capita, per square foot of floor space, per vehicle-kilome-
tre, etc.) The underlying factors that affect changes in energy intensity include:
• structural changes in the economy, such as the shift away from energy intensive indus-
tries to less energy intensive products and services now occurring in all industrial
economies;
efficiency improvements in end-uses such as homes, offices, and industries resulting
from: (i) technological advances that reduce energy use without changing basic prod-
ucts or services; (ii) market changes, such as higher energy prices, that affect consumer
behavior, and (iii) government policies to encourage greater efficiency.
Figure 1: Trends In Ontario's Energy Intensity,
1971-88
0 H 1 1 1 I 1 1 1 1 1 r— 1 1 1 1 1 I I
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88
During the 1980s, a fundamental shift in Ontario's energy intensity occurred that re-
sulted in stabilization of provincial C02 emissions during a period of robust economic growth,
with the provincial gross domestic product growing from 161 billion in 1979 to 229 billion in
1989, an average annual rate of 3.6 percent (in constant dollars), despite the 1980-81 reces-
sion. Energy intensity declined at an average annual rate of 2.3 percent. Primary energy de-
mand slowed to an average annual increase of 1.6 percent. (See Figure I.) The underlying rea-
sons for these changes include:
the OPEC price shocks and federal government's reaction to them with initiatives such
as the Canadian Home Insulation Program (C.H.I. P.);
the influence of American efficiency regulations, such as the Corporate Average Fuel
Economy (C.A.F.E.) standards for automobiles, which led to Canadian adoption of
comparable voluntary guidelines;
significant technological advances in the efficiency of products and equipment;
structural changes in the provincial economy towards rapid growth of light manufactur-
ing and services, leading to a declining energy share of heavy industries.
Although the Ministry's forecast assumptions include "significant energy efficiency im-
provements arising from market forces and regulations", its estimates of energy demand and
intensity trends for the next 15 years differ markedly from the experience of the last 10 years
They are bearish on change in energy intensity and bullish on change in energy demand.
Energy intensity is expected to slow to half the rate of the 1980s, while energy demand is fore-
cast to increase at a faster rate. One reason is positive expectation about the potential impacts of
free trade. After a period of painful adjustment, free trade is expected to lead to robust grw ft
among Ontario's resource based industries, such as iron and steel As a result, a 50 percent nsc
in CO; emissions is forecast for the industrial sector, with annual energy demand growing 2.6
percent on average, almost twice the average annual growth of 1.9 percent experienced during
1 0
the 1980s. Another reason is the Ministry forecasts that "real" energy prices (in constant dol-
lars) will not rise as much as they did in the early 1980s.
The Ministry's forecasts were made before the onset of the present recession and just as
the Free Trade Agreement was going into force. In addition, the unification of Germany and
liberalization of Eastern Europe had just begun to unfold, and the Kuwait war was far in the
distance.
There is room for argument that the eventual impact of these events, not to mention the
uncertain outcome of Canada's constitutional crisis, will compel the provincial economy down
a road towards 2005 that looks very different from the one presently envisaged by forecasts.
Here is an alternative view posed by some economists. The triple whammy of the re-
cession, the FTA , and the federal government's high interest rate policy are now leading,
many economists believe, to a permanent loss of part of Ontario's industrial base and jobs. As
the rebuilding of eastern Europe and Kuwait soak up massive amounts of Japanese and
German capital during the 1990s, interest rates, after a temporary dip during the recession, re-
turn to higher levels, acting to further limit the supply of new capital Ontario's industries des-
perately need to modernize and to become more competitive. Ontario's energy intensive indus-
tries that survive and grow will do so by reducing factor costs associated with energy use, by
capitalizing on new technologies, and by innovating. Structural shifts already underway in the
economy will continue if not accelerate in the 1990s. As a result, in 2005, Ontario's economy
would likely be much more service and light manufacturing oriented than it is today, with its
competitive edge supported more by education and technological leadership, and less by natural
resources. In such a scenario, the decline in provincial energy intensity seen during the 1980s
would also likely accelerate, the effect being to moderate future emissions of CO: even as the
economy returns to vigorous growth.
The Coalition isn't advocating such a scenario. Indeed, if such a scenario were to take
place — in particular if interest rates were to return to higher levels after the recession and stay
there throughout the 1990s — the investment needed to modernize the economy and to achieve
greater energy efficiency in sectors such as housing would be more difficult to come by. The
scenario is presented merely to emphasize the perils of forecasting and the difficulty of reaching
a consensus about what the future may hold.
Future CO; emissions will also be affected by trends in weather that may be linked to
global warming. Space heating of buildings is an important source of provincial C02 emis-
sions, and space heating requirements are influenced by the number of annual degree days. As
already noted, average winter temperatures have risen in Ontario over the past 30 years. The
long-term trend in degree days, therefore, appears downward, decreasing over the past decade
at one percent on average each year (on the basis of a five year rolling average) in Consumers
Gas's central region.19 If this downward trend continues over the next two decades, it could
moderate future C02 emissions by reducing demand for winter heating fuels and electricity.
Presently, the Ministry's forecasts do not take into account the weather factor, even though
winter heating accounts for an important share of the province's energy use and C02 emis-
sions.
Precipitation trends may have the opposite effect on C02 emissions, to the extent that
periodic droughts reduce runoff into watersheds upon which the province's hydraulic genera-
tion depends. A dry period during 1988, for instance, lowered water levels in the Great Lakes,
thereby reducing hydro capacity at Niagara Falls. The reduced capacity compelled Ontario
Hydro to increase electricity generation at coal-fired power stations to make up the difference,
leading to an increase in the province's C02 emissions. As mentioned earlier, regional climate
1 1
effects studies suggest that Ontario may experience more frequent droughts that would penodi-
cally affect the province's watersheds and hydro capacity.
Figure 1 (b): Winter Degree Days, Central
Region, 1980-89 (5 year rolling average)
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
Source: Consumers Gas
The foregoing discussion of economic and weather factors that may influence future
C02 emissions underlines some of the uncertainties of forecasting these emissions 15 years in
the future. Political events, not to mention ecological surprises, have a way of overtaking eco-
nomic trends in unexpected ways, and the events of the past year amount to no less than a
global upheaval. As Ontario's economy strives for international competitiveness and markets in
a rapidly changing global economy, who can really predict what kind of industrial capacity will
eventually thrive? And more political change is yet to come, as Quebec and other provinces face
a showdown over the future of Canada. How will Ontario's population growth and economic
prospects be affected?
No one really knows.
The government should continue to revise and refine its forecasts as a useful guide; the
Ministry of Energy, for instance, should consider collaborating with the Ministry of
Environment and Environment Canada to identify the potential impacts of global warming on
the province's space heating (and cooling) demand and existing and planned hydro capacity. In
the view of the Coalition, however, forecasts of energy demand and CO: emissions much be-
yond five years should be treated with healthy skepticism. Whatever the long-term forecasts
may be, policymakers should concentrate on how to achieve maximum reductions in energy
intensity that are economically feasible and to decouple energy demand from economic growth.
In other words, achieving reductions in energy intensity in the various sectors should be a
provincial goal, as important as achieving greater energy efficiency in the operation of equip-
ment, appliances, vehicles, and processes. Promoting lower energy intensity means encourag-
ing the growth of less energy intensive industry, land use, and life styles; it implies promoting
changes in the way we produce economic activity and the way we live. A parallel priority is
identifying strategies to further decouple energy demand from CO; emissions, by encouraging
the substitution of renewable energy for fossil energy sources.
Measures and policies to achieve reductions of CO; in the four end-use sectors of the
economy — residential, commercial, transponanon, and industry — are discussed in Chapters 2-
i :
to-6. Corresponding Appendices D-E provide detailed information on the assumptions and cal-
culations for each of the sectors, and Appendix F provides details on the calculation of a CO;
emission rate for electricity consumption that is applied in each of the foregoing sectors. A case
study of natural gas cogeneration technologies and steps the province could take to maximize
benefits to the economy by helping to commercialize these technologies is included in Chapter
7. Chapter 8 oudines utility reforms to encourage high market penetration of energy efficiency
and renewable technologies in the various sectors. Summary and conclusions are provided in
Chapter 9.
ENDNOTES
Ontario Ministry of Energy, Global Warming: Towards a Strategy for Ontario, Toronto
(March 1990)
:Friends of the Earth letter to Premier David Peterson, March 2, 1990
3World Meteorological Organization, Proceedings of The Changing Atmosphere Conference,
WMO No. 710, Geneva (1989)
4British Meteorological Office, Press Release. London, U.K. (January 1991)
5National Atmospheric and Space Administration, Goddard Institute of Space Studies, GISS
Analysis of 1990 Global Surface Air Temperatures, New York (January 9, 1991)
6David A. Robinson, 1990 Northern Hemisphere Snow Cover, Rugers University,
Department of Geography, New Brunswick, New Jersey (1991)
Environment Canada, Change in Annual Temperatures from 1959-73 to 1974-88,
Downsview, Ontario (1990)
8D. Wadhams, Evidence for Thinning of the Arctic Ice Cover North of Greenland, Nature.
345: 795-797, 1990.
9Marie E. Sanderson, et. al., Socioeconomic Assessment of the Implications of Climatic
Change for Future Water Resources in the Great Lakes/ St. Lawrence River System, Hydro-
Electric Power Generation and Commercial Navigation, etc.
10Barry Smit, Implications of Climatic Change for Agriculture in Ontario, Environment
Canada. Climate Change Digest. Downsview, Ontario (April 1987)
"Geoffrey Wall, Implications of Climatic Change for Tourism and Recreation in Ontario,
Environmental Canada, Climate Change Digest. Downsview, Ontario (1988)
^Intergovernmental Panel on Climate Change, Potential Impacts of Climate Change (June
1990), p. 2-38; The DPA Group Inc., C02 Induced Climate Change in Ontario:
Interdependencies and Resource Strategies, Environment Canada, Climate Change Digest.
Downsview, Ontario (1988); and Forests for Tomorrow, Ecological Issues of Fire. Climate
Change, Air Pollution, and Acid Rain in Ontario Forests, Witness Statement No. 1A,
Environmental Assessment Board, EA 878-02.
13Forestry Canada, State of the Forests Report, Ottawa (April 1991)
14Peter N. Duinker, Climate Change and Forest Planning and Policy in Eastern Canada, Paper
prepared for North American Conference on Forestry Responses to Climate Change, Climate
Institute, Washington D.C. (May 1990)
15Nigel T. Roulet, et. al., An Assessment of the Role of Northern Wetlands in the Exchange of
Atmospheric Trace Gases, draft manuscript submitted to the Ecological Bulletin (Sweden)
1 Environment Canada, Canada's Green Plan, Ottawa (1990), p. 102.
17Michael E. Porter, The Competitive Advantage of Nations, Free Press, New York (1990)
18Ontario Ministry of Energy, Ontario's Energy-Related Carbon Dioxide Emissions, Report to
the Inter-Govemmental Task Force on Energy and the Environment, Toronto (March 1990)
■'Consumers Gas, Comparison of Actual Versus Forecast Degree Days, Central Zone. Docket
No. EBRO 465
1 3
CHAPTER 2— RESIDENTIAL SECTOR
"One can only hope that a more generous attitude will prevail, an attitude that
recognizes that a new and different generation of prospective homeowners,
faced with higher interest rates, energy costs, and land prices, is obliged to
consider housing solutions different from those that were available to their par-
ents. This is no cause for alarm. It may be an opportunity to attain better— and
more livable — towns and cities."
Witold Rybczynski, McGill University, a recent article for The Atlantic
2.0 Introduction
There are close to 3.6 million homes in Ontario today. They include single family de-
tached homes — 58 percent of the housing stock — and single family semi-detached and row
houses, as well as apartments. Together with the people who live in them, the province's
homes and apartments consumed 823 petajoules (PJ) of energy in 1988, about 22 percent of
the province's total energy or about 140 GJ of secondary energy per household. About 1.1
million new homes and apartment units are forecast to be built over the next 14 years, an in-
crease of 31 percent (not including demolitions), about half in the Greater Toronto Area
(GTA).
2.1 Profile of C02 emissions
In 1988 energy use in Ontario's residential sector produced 30.5 megatonnes (Mt) of
CO2 emissions, about 18 percent of the province's total. The largest share of emissions stems
from the burning of natural gas, followed closely by electricity generation. Virtually all elec-
tricity related CO; emissions come from coal, which accounts for about 25-30 percent of
Ontario Hydro's generation mix today.
Residential C02 Emissions by Source, 1988
propane/wood
electricity
1 4
Ontario homes produce an average of seven tonnes of CO: each year. Space heating
produces almost two-thirds of a typical home s CO: emissions, with the balance associated
with water hearing (16 percent) and appliances (13 percent). Row houses and apartments, be-
cause they are smaller in size and less energy intensive (units of energy consumed per unit of
floor space), may produce half the CO; emissions as detached homes.
C02 Emissions by Residential End Use, 1988
Otfr nrvnlinnces
Liahting
Air conditioning^
Refrigeration 4
Cooking 3
Misc. 5%
4%
Water heating
16% '
Space heating
64% *
The Ministry of Energy's forecast projects that by 2005, emissions of CO: from the
residential sector may increase only about two percent (see Appendix A). This is largely be-
cause the Ministry forecasts that coal will decline to about 12 percent of the generation mix in
2005, thus cutting the CO2 emission rate of electricity by half and more than offsetting the
modest increase in electricity's market share that is also foreseen. In addition, the Ministry
forecasts that end use efficiency improvements in space heating will lead to a decline of heating
energy per dwelling of about one percent per year, contributing to a modest decline in energy
intensity in the sector over the next 15 years.
2.2 Profile of Energy Intensity Trends
There are several ways to describe energy intensity in the residential sector. The most
useful measure is energy per unit of floor space, but figures are sketchy, making it difficult to
analyse trends. A comparative snapshot is given in accompanying Table 2 (a). Row houses
typically use less than three quarters — and apartments less than two-thirds — the energy that
single and semi-detached houses use per unit.
Another useful measure of energy intensity is total residential energy per capita. Over
the past 15 years there has been relatively little change in residential energy per capita, primarily
because the number of persons in the average household has been declining due to lower birth
rates and higher divorce rates. Whether there are five people living in it or three, it takes the
same energy to heat a house. In addition, suburban expansion during these years pushed up the
1 5
average floor space of new houses from 1,500 sq. ft. in the 1960's to over 2,000 sq. ft. in the
1980s.
Table 2 (a): Energy Intensity of Ontario's Residential Housing
Average
Average
No.
%
Avaraga
energy
energy
of
floor-
floor
inten-
Inten-
Dwelling type
units
spaca
space
sity
sity
m*
GJ/m'
GJ/unit
Single/
2,356,507
76%
132
1.28
169
semi-detached1
Row house1
193,782
5%
96
1.28
123
Apartments2
982,984
19%
79
.66
52
m-metre; GJ-billion joules
Note: Energy intensity for single, semi-detached, and row houses are derived from aver-
ages for single family housing. Because row houses have a higher volume to exterior wall
ratio and a lower window fraction, they are more thermally efficient than single or semi-de-
tached housing. In actuality, therefore, they have lower energy intensities than indicated
here.
Ministry of Energy and Canada Mortgage and Housing Corporation. 1988 estimate
2Ontano Hydro. 1990 Commercial End-use Forecast (December 1990), 1989 estimate
Finally, energy intensity can be measured as average energy consumed per household.
Although the number of Ontario homes increased 50 percent over the period 1973-1988, the
energy consumed by these homes increased only about 17 percent. As a result, energy use per
household declined about 27 percent over the period.
The decline in household energy intensity was caused by several factors, among them:
social trends mentioned above led to greater demand for smaller housing units like
apartments, as well as less demand for hot water per household;
federal government initiatives like the Canada Oil Substitution Program (COSP) and the
Canadian Home Insulation Program (CHIP) encouraged 300,000 homeowners in the
early 1980s to convert from oil to higher efficiency natural gas furnaces and to improve
the thermal performance of their homes.
When compared with housing in many European nations and many U.S. states, the
thermal performance of Ontario's housing appears relatively poor. Although cold climate is
often cited as a reason for the relatively high energy use of the province's homes, when com-
pared with housing in countries that experience comparable degree days of winter heanng, like
Sweden, Ontario's homes still appear wasteful. Single-family electric Swedish homes, for ex-
ample, use an average of about 1 10 kWh/m* for heating annually, while Ontano homes use
about 130 kWh/rrP.20 The primary reason is that Sweden mandates more insulation in neu
housing than does Ontario.21
2.3 Opportunities for C02 Reductions
Significant energy efficiency potential remains in Ontario's housing stock. In addition,
the efficiency of the best gas furnaces is now approaching 95 percent and should make attrac-
tive the substitution of natural gas for electric heanng. Finally, untapped potential for renewable
energy exists in active and passive solar water and space heating, advanced windows, and air
sealing.
1 6
Efficiency Potential
According to the Canada Mortgage and Housing Corporation (CMHC), about one-third
of the province's single-family dwellings have no or only minor insulation. Typically these
homes were built prior to 1945 before building codes required any energy efficient construc-
tion. Sometimes they have small amounts of cellulose insulation in the ceiling. These homes
typically consume two-to-three times more energy for heating than homes built today. (See ac-
companying figure.) Retrofitting these homes with a combination of air sealing, insulation, and
high efficiency furnaces to achieve thermal equivalence with new homes being built today
would save about 62 PJ annually, about 13 percent of the province's total secondary residential
energy and would be cost effective according to a recent study.22
Figure 2(c): Average Annual Heat Load of
Residential Archetypes
140
Uninsulated Minor Standard Improved R2000
Source: Canada Mortgage and Housing Corporation and Hot 2000 analysis
An energy efficiency retrofit carried out on an older home in Toronto in 1982, how-
ever, demonstrates that the technical energy efficiency retrofit potential in older housing is
much greater.
The Howland House, a single family, detached house, was remodelled in 1982 by the
Ministry of Municipal Affairs and Housing to show what a maximum thermal retrofit, under-
taken in connection with typical renovation work, could accomplish. The higher insulation
levels, combined with a more efficient furnace, heat recovery ventilation, and passive solar
heating on the third floor, achieved a reduction in energy used for annual space heating from
293 GJ to 17 GJ, a reduction of 94 percent. Although the project was designed as a technical
demonstration project, most of the measures could be implemented in existing homes when
major renovation is undertaken, at an incremental cost that is economically attractive.23
Recent EMR studies of residential efficiency retrofit potential using extremely conser-
vative assumptions (no energy price rise in the next 30 years) indicate that a variety of cost ef-
fective strategies exist. For instance, one study examined a variety of options for improving the
thermal efficiency of the different archetypes of homes. The measures included: air sealing;
retrofitting high performance windows; and installation of high efficiency furnaces and heat re-
covery ventilators to ensure adequate ventilation. Savings would be 62 PJ or 20 percent of the
province's residential energy consumed for heat, at a cost of less than 40/kWh.24
1 7
Studies of electrical efficiency potential only in Ontario commissioned by the Ministry
of Energy and undertaken by Ontario Hydro indicate a range of 29-to-43 PJ of economic sav-
ings is possible in the residential sector by 2000 on a life-cycle cost basis of $.07/kWh or less,
with most measures costing less than $.05/kWh. Such efficiency potential represents a savings
range of 18-to-27 percent of projected electricity residential use in 2000 as projected in these
studies.25
As for new housing, the Advanced House illustrates what is possible with commercial
technology today, if singular attention is paid to construction technique and materials. A typical
suburban home built in Brampton in 1989, the Advanced House was designed to exceed the
energy performance of R2000. Incorporating passive solar design, high performance win-
dows, compact fluorescent lighting, and high efficiency appliances, the house uses annually a
total of 40 GJ, compared with 100 GJ for a R2000 house of similar size and 125 GJ for a
house of similar size constructed to present provincial building code standards, a reduction of
70 percent from present code. The only advanced feature of the house is an integrated mechani-
cal system that combines the functions of heating, cooling, heat recovery, and ventilation in the
same equipment. Simple payback from energy savings accrued by the Advanced House, com-
pared with present building code, is about 10-15 years. The 20 kW of peak power saved by the
house cost $l,000/kW, less than a new power plant.26
Fuel Switching Potential
About 12 percent of the residential sector's space heating loads are presently met b>
electricity, and the Ministry of Energy forecasts this share will nse by 18 percent to 61 PJ by
2005. Since electricity space heating loads constitute the primary component of the province's
winter peaking demand, which is met by anywhere between half and three quarters coal-fired
generation, CO; reductions can be achieved by substituting natural gas furnaces for electric
heating when major renovations are done, and by restricting the future use of electric resistance
heating in new construction.
There are two reasons for a fuel switching strategy in the residential sector. First, sig-
nificant thermal and distribution losses occur as fossil or nuclear power is generated in a steam
boiler and then transmitted over the grid. Typically less than a thud of the energy released by
coal when it is bumed, for instance, reaches the home, making electric water and space heating
in the home only about 25-30 percent efficient overall. On the other hand, high efficiency natu-
ral gas furnaces rated 85-95 percent are now commonplace. Substituting natural gas space and
water heating for existing electric heating would lower CO; emissions, as well as reduce the
demand for electricity and the need for new power plants. Second, natural gas produces about
half as much CO; as coal per unit of energy when it bums.
The aforementioned EMR studies indicate that retrofit of high-efficiency furnaces in 80
percent of Ontario's single family homes could be done for 6c/kWh or less. While the eco-
nomics of such retrofits will be affected by how much air sealing, insulation, and higher per-
formance windows measures are done fust — such measures will tend to reduce the cost effec-
tiveness of furnace replacements — many homes heated with electric furnaces that already have
ventilation ducts will present good economic opportunities for fuel switching.
Economic applications of fuel switching also exist in high-rise apartment complexes,
where hot water typically circulates continuously to each unit so the occupant doesn't have to
wait when the faucet is opened. Present technology permits use of this existing hot water dis-
tribution system in the building for space heating purposes.
Some areas of the province, especially northern Ontario, do not have access to natural
gas. These areas tend to be served by oil, electric, or wood heating. High efficiency furnace
1 8
options for these fuel sources, however, are also commercially available. One promising elec-
tric option, for instance, is the ground source heat pump, with efficiencies in the 200-240 per-
cent range that almost entirely make up for the low system efficiency that characterizes electric-
ity generation and distribution. Potentially these could replace electric furnaces and hot water
heaters. In addition, new technologies such as the all-electric integrated mechanical system
demonstrated in the Advanced House should become commercially available in a few years.
Such advanced electric technologies can easily be combined with passive solar design to reduce
the capacity of the heating systems installed.
Renewable Energy Potential
Renewable energy represents the most important untapped resource in Ontario's resi-
dential sector. A recent study of the passive solar potential in Canada concluded that significant
opportunities exist for commercialization of new technologies such as high performance win-
dows, integrated mechanical systems such as the one installed in the Advanced House, and
thermal storage. In Ontario's residential sector, the studv estimates the reasonable market po-
tential to be 61 PJ by 20 10.27
The solar water industry in Canada has estimated that about 75 percent of Ontario's
homes could be retrofitted with solar hot water heating, offering a displacement of about 26 PJ
of conventional fuel, or a total of 50 PJ when "own uses and losses" and the low system effi-
ciencies of electric water heating are taken into account. The technology is commercial today,
and Ontario companies that produce domestic solar hot water systems, such as Solcan
Industries, have long been marketing well proven systems.28
One niche application of solar water heating that offers considerable promise is the
heating of swimming pools. Of the 280,000 outdoor pools in Ontario, about 75,000 are
heated, largely with gas. In addition, approximately 15,000 new in-ground pools are built each
year, about half heated with natural gas. With appropriate incentives, it is estimated that 80 per-
cent of these pools would switch to solar hot water heating. Combined with an initiative to re-
place the motors that are used in the circulating pumps of these pools with more efficient mo-
tors, a total of 5.4 PJ could be saved.29
A recent report commissioned by EMR suggests that photovoltaic power could be com-
petitive with grid electricity by 2010. U.S. studies suggest that the timeline for commercializa-
tion of PVs for conventional applications — as opposed to to use in remote locations and for
small niche markets — is much nearer, 1995-2000 for, some advanced film technologies.
Advances will bring the cost of PV power down significantly by the mid-1990s. The most
promising thin film technology appears to be copper indium diselinide (CIS). Siemens Solar
Technologies, which last year acquired ARCOs CIS and silicon PV business and research labs
for $30 million, may be the first to offer 10 percent efficient, stable, low cost modules in 1993-
95. CIS modules costing $50/m2 appear to be feasible in the near-term, which would mean that
in New York, the total cost for intermittent peaking power provided bv CIS PVs mav be below
6c/kWh by 1995!30
Given the rapid advances being made in PV technologies — several Ontario firms are
leading Canada's effort to develop thin film technologies — it is difficult to estimate the potential
in Ontario. Accepting the estimate from the EMR commissioned report, there may be a potential
of only 1 PJ in Ontario over the next 10-15 years. If the more optimistic projections being re-
ported by the Solar Energy Research Institute hold true, however, the potential could be signif-
icantly higher, particularly for the residential and commercial sectors, where PVs sited on roof
tops to provide intermittent peaking power would require no energy storage.
In sum, a potential of 1 10-120 PJ of renewable energy exists in the residential sector in
the existing building stock.
1 9
2.4 Measures to Reduce C02 Emissions
Measures applied to single family residential buildings are described in detail in
Appendix B, while multi-family residential buildings are described in Appendix C. The eco-
nomically attractive measures assumed to reduce CO? emissions in single-family residences in-
clude the following:
RETROFIT TARGETS (2005) FOR SINGLE-FAMILY RESIDENCES:
Efficiency scenario:
•Improvements in thermal envelope and furnaces reduce heating
energy in 70 percent of the building stock by .25%
•Reducuon in cooling energy in all buildings by .25%
•Significant penetrauon of compact fluorescents reduces lighting energy by 60%
•Improvement in average efficiency of water heater stock of 25%
•Improvement in average efficiency of refrigerator stock of 40%
•Improvement in average efficiency of clothes dryer stock of 25%
•Improvement in average efficiency of cooking appliance stock of 20%
•Electric heat pumps average 200 percent efficiency m the following
percentage of homes that presently have heat pumps 75%
Fuel switching scenario:
•Switch from oil to gas space and water heaung by 50%
•Switch from electricity to gas space and water heaung by 20%
Renewable scenario:
•Retrofit domesuc solar water heaung in 30 percent of building stock, saves 22 PJ
•Retrofit passive solar heating technologies, such as atuc heat return,
in 10 percent of building stock, saves 16 PJ
ENERGY INTENSITY TARGET FOR NEW RESIDENTIAL:
It is assumed that the average energy intensity of new residences, as a result of bien-
nial modification of the provincial building code, declines gradually to 40 GJ for a
typical 2,000 sq. ft. home (equivalent to the energy raung of the Advanced House)
from the present code standard of about 125 GJ for an equivalent sized house. These
figures include total energy use, i.e., healing, cooling, appliances, etc. The same
proporuonal decline is applied to row houses. The decline occurs in the following
steps (per unit of housing):
1989-90
Detached + semi 1 50 GJ
Row 1 10 GJ
'R2000; Advanced House
The average energy intensity of new multi-family residences declines 50 percent from
the average level of the 1988 multi-family building stock by 2005. Hence, apartment
stock constructed 1988-2005 would average .4 GJ/m2 or 8 kWh/ft: in 2005. Details
are provided on new mulu-family residenual buildings in Appendix C, Tables C-6
and C-ll. One caveat is in order. These projections do not assume increasing use of
electric appliances in the future, a continuing trend that will tend to increase home
energy use in the future. On the other hand, the calculauons are conservauvely based
on a 2,000 square foot house, somewhat larger than what is likely to be the average
size of new homes over the next 15 years.
As a result of these measures, CO; emissions from the residential sector are reduced by
34 percent, assuming that electrical demand is met in 2005 by power generation that has a fuel
mix described in Appendix F. The results are summarized in Appendix B, Table B-l.
It is clear that new housing offers the single most important opportunity for enero el
ficiency improvements. Over a million new homes and apartments may be built in Ontario in
the next 15 years. Failure to require standards of construction that result in cost-effective en-
20
-92
1993-95
1996-99
2000+
125
1001
60
402
90
70
45
30
ergy savings represents an opportunity lost forever. For instance, while it costs about $5,000
more to build an R2000 house from start than to build one to the 1978 code, upgrading an ex-
isting 1978 house to R2000 may cost $10,000-20,000. At present energy prices, a new R2000
home pavs back in energv savings in just 4-to-5 years, within the period of typical home own-
ership. In the equivalent retrofit case, the payback period is more likely to be 10-20 years and
will be viewed as uneconomic by many home owners (although from the point of view of
Ontario Hydro, investing in the retrofit in electrically heated homes could be a cost effective
way to avoid the cost of new generation).
If biennial review leads to progressive upgrading of the energy standards of the Ontario
Building Code codifving features of the R2000 protocol and the Advanced House, the average
house built in the 1990s will use half as much energy as the typical house built in the mid-
1980s. Further, if the province, in cooperation with utilities, seeks to develop and commercial-
ize a host of advanced efficiency renewable technologies, such as super performance windows
(R-10), thermal storage, and photovoltaics, new housing could be on a trajectory towards no
energy load growth by 2005.
Upgrading the energy standards in the code will stretch the skills and technical capabili-
ties of the building industry, and considerable effort will need to be put into training that dis-
seminates air sealing techniques and analysis and other renewable technologies. In addition,
initiatives to educate home buyers regarding the economic and environmental consequences of
home energy use will need to be undertaken to change their buying preferences.
2.5 Barriers to Achieving Measures
The relatively high energy intensity of Ontario's residential sector is not due so much to
climate, but to other factors:
• relatively low energy prices tend to discourage efficiency by making the payback for
many measures longer than the period of home ownership, although many homeown-
ers would no doubt pay more than is economically justifiable in order to "save the envi-
ronment", were adequate retrofit programmes available to them;
the problem of "split incentives", i.e., building owners pass energy costs on to renters;
lack of information about home energy efficiency among architects, builders, engi-
neers, and home owners;
the domination of tract builders in the industry, whose construction practices often lack
the flexibility or skills to incorporate solar or energy efficiency measures;
speculative construction practices that put a premium on minimizing first costs;
municipal land use policies, especially in the GTA, that favour sprawl, rather than
compactness of new communities and row housing;
weak energy standards in the provincial building code, reflecting a regulatory system
that historically has catered mostly to the needs and perceptions of builders;
lack of commitment by utilities to energy efficiency, or legal/regulatory barriers, such
as a prohibition on Ontario Hydro that limits its energy efficiency programmes
exclusively to electrically heated homes.
The most effective way to overcome these barriers is for government and the utilities to
work together to provide high financial incentives— 50-100 percent of the installation costs— to
homeowners to undertake the major retrofit measures necessary.
Direct installation programmes work in the U.S. The federal Low Income
Weatherization Program was set up 15 years ago by Congress to shield low income
homeowners from the oil price shocks caused by OPEC. Each state set up its own programme
and, with federal funds, has carried out an enormous variety of home retrofit programmes. The
21
most successful programmes in states like Wisconsin and Minnesota with cold climates are
achieving 15-20 percent reductions in energy use for heating.31 Such reductions are being
achieved using simple weather stripping, caulking, window repair, and blown in insulation,
with a cap of $1,600 cost per home. If the cap were higher, say double or triple, additional
insulation, air sealing, ventilation measures, and furnace upgrading could achieve 20-40
percent reductions in heating energy use on homes situated in a climate similar to that of
Ontario.
The keys to success of these programmes include:
decentralization of decision-making with weatherization crews assuming full respon-
sibility to ensure subsidies are based on results, not expenditures;
involvement of the home's occupant in all facets of the project, guided by an "education
protocol";
• careful attention to the cost effectiveness and health safety of retrofits;
installation fully paid, up to $1 ,600 per house;
• use of the blower door, infrared cameras, and other sophisticated equipment for pre-
and post-weatherization tests.32
The lessons learned from evaluation of these programmes and many other utility
residential programs indicates that high market penetration and significant energy savings
depend especially on direct personal contact with the home owner, high financial incentives,
well trained and responsible retrofit crews, and a strategy that emphasizes cost effectiveness. In
cold climates, such a strategy would always start with a significant effort to weatherize and seal
a home. High efficiency furnace retrofits make more long-term economic sense afterwards, be-
cause the equipment can then be downsized.
2.6 What Ontario Can Do
Fortunately, the Province has a variety of regulatory instruments that it can use to en-
courage more efficient residential buildings, equipment, and appliances, especially the provin-
cial building code and the Energy Efficiency Act. There is also need, however, for an energy
transfer tax to address the equity issues raised as the costs of new housing rise reflecting incor-
poration of new efficiency measures. A major public education initiative is also needed.
Efficiency Strategies
A variety of strategies are recommended to address the aforementioned barriers. They
include:
• biennial modification of the provincial building code to progressively reduce the energy
intensity of new housing over the next 15 years;
• wider application of the Energy Efficiency Act to improve the efficiency of windows,
furnace fans, fireplaces, and lighting;
• development of a home energy rating system to educate home buyers and owners,
along with mortgages that reduce qualification criteria and rates for purchasers of en-
ergy efficient homes;
• establishment of an "affordable Homes programme" that encourages new row housing,
as pan of an overall urban intensification strategy for the GTA and other urban centres.
STRENGTHEN THE PROVINCIAL BUILDING CODE. For new housing, a high priority
should be assigned to biennial revisions of the provincial building code to include incremental
energy efficiency standards, initially on a prescriptive basis, but by the mid-1990s working
towards a performance standard once the building industry acquires sufficient technical skill. A
::
go round in 1992 should capture the remaining measures necessary to bring all new housing up
to, if not a little beyond the R2000 standard. These include: full height basement insulation; the
R2000 air seal standard; requirement of adequate ventilation for health reasons; and double
glazed, low-E, gas filled windows (R-3.6). The only barrier to the implementation of these
measures is the skill of the builders in implementing the air sealing measure and testing for air
tightness, but since many Ontario builders have gained considerable experience in this area
(and Ontario Hydro already has a training programme), extension of this knowledge to the
industry as a whole should not be difficult.
Presently, the building code does not apply to renovations of existing housing. It
should. Up to half of the construction activity in this sector is typically renovation, representing
significant opportunity for retrofit of walls and ceilings with insulation, replacement of win-
dows with more energy efficient types, and construction of home additions to new building
code standard. Revision of the building code in 1992, therefore, should apply energy codes for
new buildings to renovation activity.
In 1994 and 1996, further incremental building code revisions should begin to incorpo-
rate standards that reflect the technologies and construction practices utilized in the Advanced
House. These include:
• higher levels of insulation, including R-40 walls and R-60 ceilings by 1996;
• incremental improvements in energy efficient windows, with the aim of achieving R-4-
to-R-6 performance in windows by 1996 (they are commercial now), and R-5-to-R-8
by 2000 (early commercial products now available);
builder's option to choose an overall performance standard, as opposed to prescriptive
standards for individual building components, that encourages the use of passive and
active solar design by 1994.
To further encourage much wider use of solar heating in niche applications, such as
swimming pools, consideration should be given to special taxes or hook-up fees, such as a tax
or hook-up on pool heaters, to close the cost gap between the solar product and its fossil based
alternative.
Further to these improvements for single family housing, a high priority should be
placed on incorporating energy efficiency standards for apartments in the building code, per-
haps based on current American Society of Heating, Refrigerating and Air-Conditioning
Engineers (ASHRAE) standards already in wide use in the U.S.
The key to the success of residential retrofit programmes implies the significant as-
sumption by municipal electric utilities and municipalities — they have the most potential direct
contact with residential energy users — for the implementation of such programmes and their
willingness to offer high financial incentives that go beyond the rebate and loan programs now
favoured.
Therefore, major reform of Ontario's utility regulatory framework would be needed re-
quiring Ontario's private gas and public electric utilities to adopt "least cost planning" mandates
that would put energy efficiency retrofit programmes on an even economic playing field with
supply. Such reforms are discussed in Chapter 8.
Suggested retrofit priorities to start would be, in order of importance:
(i) low income housing, because people living near or below the poverty level will be
hardest hit by the Ontario Hydro's 40-50 percent rate rise anticipated in the next few
years;
23
(ii) electrically heated homes in northern Ontario, because rates are higher to start with and
economic measures such as ground source heat pumps are available;
(iii) all remaining electrically heated homes in the province, because most homeowners will
be particularly receptive to energy saving programmes;
(iv) the province's approximately one million uninsulated homes, because significant eco-
nomic energy savings are possible;
(v) conversion of electric to high efficiency natural gas furnaces in area where ground
source heat pumps are impractical and natural gas is available.
RAISE PROFILE OF the energy efficiency act. In addition to the foregoing im-
provements, a variety of "housekeeping" products should be immediately regulated under the
Act. Fireplaces, furnace blower fans, windows, and lighting should be regulated under the
Energy Efficiency Act. Furnace blower, ventilation, and exhaust fans and burner nozzles for
natural gas and oil furnaces particularly offer important opportunities for energy efficiency
gains. Fans, for instance, in many forced air systems use as much energy as the furnace itself,
but their high energy use has generally escaped notice. Since 85 percent of Ontario's housing
stock has forced air systems, they could offer a significant opportunity for energy reductions.
To supplement the appliance rulemaking already in progress, immediate priority should be
given to adoption of California's 1993 standards for refrigerators and other common household
appliances, the most stringent in North America.
The Energy Efficiency Act could be one of the province's most important instruments
for achieving reductions in energy use in all sectors, but the Ministry's staff assigned to the Acj
number only two persons presently. The staff should be considerably expanded and the profile
of the office significantly raised. Commensurate with these steps, an on-going public consulta-
tion process should be undertaken to allow the staff to benefit on a regular basis from the wide
experience on these matters that exists in the private sector and among environmental groups.
In addition, funding should be available to permit representatives of environmental, consumer,
and social housing groups to sit on the relevant Canadian Standards Association committees.
develop a provincial home energy rating system. Also important in edu-
cating consumers and realtors will be a uniform provincial home energy rating system, using as
models perhaps the schemes that are gaining wide acceptance in the U.S. and the U.K. The
rating would be applied to the sale of new and used homes, requiring an energy audit as a
condition of sale. The home energy rating programme, however, should encourage home
owners to rate their houses anytime during ownership, for instance, after a major renovation
that incorporates efficiency measures, so that a shortage of auditors during high seasonal
demand for housing sales, say in February and March, doesn't unduly hold up closings. (This
has occurred in some state programmes in the U.S.)33
PROMOTE URBAN GROWTH BOUNDARIES AND AFFORDABLE ROW HOUSING.
Finally, the province should undertake changes in the land use planning process to discourage
urban sprawl, especially in the GTA. The State of Oregon has developed a land use planning
process that might be adaptable to Ontario. Its "urban growth boundary" process seeks to iden-
tify and separate urbanizable land from rural land and establishes criteria under which rural
lands can be classified "urbanizable". The process requires the development of urban areas be-
fore urbanizable land is convened to urban uses and gives priority to the retention of Class 1
farm land and to the minimization of adverse environmental and energy consequences '4
In addition, the province should encourage the construction of smaller, more energy
efficient, and affordable homes. We suggest an effort to develop and commercialize, in collab-
oration with architects and builders, an affordable home programme that seeks to make 1,000
square foot or less homes, costing $60,000-100,000, attracnve to the public, "infilling" land in
Metro and other urban centres around the province.
24
Such a model for this kind of house has already been developed by Witold Rybczynski
at McGill University in Montreal, the Grow Home. About 10,000 visitors viewed the Grow
Home when it was on display on the campus, attracting mostly people looking for affordable
housing alternatives to apartments. Asked if they were ready to live in a house smaller than
1.000 feet, 75 percent said yes, and 69 percent said the Grow Home was a good buy. The
chief obstacle to smaller houses is not the consumer or the builder, but municipalities that resist
the idea of allowing the subdivision of land into smaller plots, because they sadly view smaller,
less expensive homes as a threat to property values and community status.
Fuel Switching Strategies
Restrictions are needed on the use of electric resistance heating, furnaces, and water
heaters in new residential construction, to encourage maximum penetration of natural gas (or
oil) heating in new buildings. Regions of the province that do not have access to natural gas
supply should be exempted from any such restrictions, but in such regions every effort should
be made by utilities to advance the potential for solar passive heating, solar water heating, and
high efficiency ground source heat pumps that have seasonal efficiencies in excess of 200 per-
cent.
Initially, the government can restrict the use of electric resistance heating in buildings
such as social housing that it funds, and recently it moved to do so. Looking beyond its own
strategic procurement policies, however, the province will need to develop other strategies to
influence the market. One option, for instance, would be to require a hook-up fee for electric
resistance heating. B.C. Hydro, for instance, has submitted a rate submission that would
establish a residential electric space heating connection charge ranging from $650 for apart-
ments to $1,150 for single family homes.35 There is no reason why a similar scheme couldn't
work in Ontario. Another option, discussed in Chapter 8, would be amendment of the Power
Corporation Act to allow Ontario Hydro to operate in gas territories and to switch heating from
electric to other fuels.
Renewable Energy Strategies
The best way to encourage the wide variety of renewable technologies, ranging from
advanced windows to passive solar heating design, is to require new buildings to become pro-
gressively less energy intensive over time. Such a regulatory policy will stimulate a significant
market for these technologies and designs because they will become the most cost effective
means of compliance.
A variety of interim strategies can also help. Strategic procurement by government
when it funds the construction of new buildings can expand the market for renewables.
However, the creation of an artificial fad in the absence of a supporting regulatory and market
strategies will ultimately lead to failure when, for one reason or another, government officials
rum their attention to some other fad.
Utilities should be encouraged to lease solar hot water heaters. Niche markets such as
outdoor swimming pools are a ready place to start.
Finally, all new residential construction should be required to be "solar ready", with the
installation of tubing between the roof and the basement mandated by a future modification to
the provincial building code. The incremental cost of installing such tubing in frame construc-
tion is likely to be minimal and will make the later retrofit of solar heating panels more cost ef-
fective.
25
2.7 Economic and Social Implications
The measures discussed in this section will make housing more expensive, but they
will reduce annual operating costs, in most cases paying back the home owner during a reason-
able period of time especially since Ontario Hydro's rates are steadily rising, while allowing
Ontario Hydro to avoid the expense of new capital construction by postponing new generation
further into the future. Nonetheless, at a time when home buyers are seeking affordable homes,
home builders are likely to resist new regulatory measures that add to their costs and widen the
price gap between existing and new homes. Furthermore, low income home owners or renters
are likely to be hard hit by Ontario Hydro's rate rises, not to mention subsequent rises that will
eventually be necessary to pay for the utility's energy efficiency initiatives in the years ahead.
ENERGY TRANSFER FEE. One way to redress this issue would be to levy an energy
transfer fee — similar to the land transfer tax — on the resale of homes (first sale of new homes
would be exempted). The level of tax would be proportionate to the floor space of the house
and its relative efficiency (energy consumed per unit of floor space). The assessment would be
linked to the energy efficiency rating system, and an energy audit would be required as a con-
dition of sale. The revenues collected would be held in "escrow" for the home buyer to use for
energy retrofit measures up to one year within purchase of the home. After that period the
funds would revert to the government.
LOW INCOME WEATHERIZATION PROGRAM. Energy costs account for a larger pro-
portion of the family budget of a low income family, and especially for those living in electri-
cally heated homes/the rate rises that are coming are likely to be extremely regressive. Ontario,
therefore, should establish a low income weatherization programme like the 15-year old federal
programme in the U.S. The Wisconsin and Minnesota versions of the federal programme
would serve as good models, since those states have cold climates, and because the
weatherization protocols they have developed have managed to achieve energy reductions in the
15-to-20 percent range at a modest cost
The programme would be a decentralized initiative, with utility funds being channeled
through a provincial agency on a block grant basis to municipalities that have organized pro-
grams with the considerable participation of community and neighborhood organisations. The
province's role, apart from funder, would be to develop a rigorous, but flexible weatherization
protocol to ensure maximum, but cost effective energy reductions and to provide training pro-
grams and materials for public eduction as well as technical training of weatherization crews.
ENERGY EFFICIENCY MORTGAGES. To further improve the home buyer's motivation
to purchase an energy efficient home, the province, working with the utilities and major mort-
gage lenders, would establish an energy efficiency mortgage programme that would provide a
number of financial incentives to the buyers of energy efficient homes. For instance, since
monthly house payments are lower in the energy efficient house, the banks would be able to
lower the income requirements for buyers of such homes, increasing the affordability of home
purchases. Such mortgages have been available in the U.S. for many years, though due to the
lack of uniform home energy ratings, they haven't achieved significant market penetration
there.36
26
ENDNOTES
20Stanley But, et. al.. Analysis of Electricity Consumption Date: 1000 House Study, In
Proceedings of 1990 Summer Study on Energv Efficiency in Buildings, Volume 10,
ACEEE. Washington D.C. (1990)
21 Stephen Tyler and Lee Schipper, Changing Electricity Use in Homes: Explaining the
Scandinavian Case, In Proceedings of 1990 Summer Study on Energy Efficiency in
Buildings, Volume 2, ACEEE, Washington D.C. (1990)
~EMR. Remaining Energy Conservation Potential in Canada: Residential Sector Cast Studies,
prepared by Marbek Resource Consultants, Ltd. Ottawa (December ( 1990)
:3Ministry of Municipal Affairs and Housing, Howland House Technical Fact Sheet, Queen's
Park, Toronto (September 1982)
:4EMR, Remaining Energy Conservation Potential in Canada: Residential Sector Cast Studies,
prepared by Marbek Resource Consultants, Ltd., Ottawa, (December 1990)
^David Brooks and Ralph Torrie. Electricity Conservation Supply Curves for Ontario, Ontario
Ministry of Energy, Toronto (August 1987)
:6Ontario Ministry of Energy, The Advanced House, Toronto (1989)
27EMR. Passive Solar Potential in Canada: 1990-2010, Scanada Consultants Ltd., Ottawa
(March 1990)
28Doug Hart, Report of the Renewable Energy Subcommittee for the Ontario Global Warming
Coalition, Toronto (March 6, 1991)
29Ibid.
30Ken Zweibel, Harnessing Solar Power: The Photovoltaics Challenge, Plenum Press, New
York (1990)
31Jeff Schlegel, et.al., The State-of-the-Art of Low-Income Weatherization: Past, Present, and
Future, In Proceedings of 1990 Summer Study on Energv Efficiency in Buildings, Volume
7, ACEEE, Washington D.C. (1990)
32Lester Shen, et.al.. The M200 Enhanced Low-Income Weatherization Demonstration Project,
University of Minnesota (February 27, 1990)
"interview with Ron Hughes, President, Energy Rated Homes of America, Little Rock,
Arkansas
34interview with Susan Anderson, Director, City of Portland, Oregon Energy Efficiency
Office
35B.C. Hydro and Power Authority, Residential Electric Space Hearting Connection Charge,
Rate Design Application, Victoria (January 1991)
36Janet E. Spirer, Energv Efficient Mortgage Programs, American Gas Association,
Washington D.C. (February 1988)
27
CHAPTER 3— COMMERCIAL SECTOR
"No major breakthroughs are expected in lamp technology in the next decade."
Ontario Hydro report (1986) on commercial conservation, four
years prior to $5 rebate offer on compact fluorescent lamps
3.0 Introduction
There are approximately 240 million square metres (m:) of commercial floor space in
Ontario, including a wide variety of types, with offices accounting for the largest share of total
floor space, followed by warehouses, educational facilities, and retail stores. All types of
buildings together used about 643 petajoules (PJ) in 1988, or about 17 percent of the
province's total energy. The commercial sector's share of Ontario's energy use is low com-
pared with other countries, a reflection of the high energy intensity of the province's industry
and transportation. Commercial energy use is forecast to grow at the average annual rate of 1.8
percent by 2005, driven mostly by an average annual growth in floor space of 3.4 percent.37
3.1 Profile of C02 Emissions
In 1988, Ontario's commercial buildings produced about 21.2 megatonnes (Mt) of CO;
emissions, 13 percent of the province's total. Commercial buildings accounted for the lowest
share of CO; emissions of the four energy end-use sectors.
Commercial C02 Emissions by Sub-sector, 1988
Streetlighting2%
Institutions
14%
Other
31%
Recreation
3%
Warehouses
6%
Hotels/restuarants
6%
Offices
21%
Retail stores
16%
The end uses that predominate in this sector insofar as CO; emission are concerned are
space heating, office equipment or "plug load", and lighting. Most of the space heating, about
79 percent, is fueled by natural gas, while all the other major end uses consume electricity.
Indeed, commercial buildings are unique because they use the highest proportion of electricity
28
of any end use sector, and that use occurs primarily during the peak electricity demand period
of the dav when Ontario Hydro's coal-fired power plants typically provide from half to three-
quarters of the province's peaking energy mix. As a result, over half of the CO; emissions
from commercial end uses can be attributed to coal-fired electricity generation, mostly from
consumption of energy by lighting and office equipment.
Because of the predominance of electricity in this sector, emissions are likely to be
higher than reported here, since over half of the commercial sector's energy use comes from
electricity, much of which is supplied during the peak demand period of the day. For instance,
assuming that rwo-thirds of the commercial sector's electricity demand is met by peaking gen-
eration and two-thirds of peaking generation is provided by coal, the commercial sector's total
CO; emissions would be closer to 30 Ml
Electricity is expected to increase its share of commercial end use by 2005, largely due
to the rapid growth in use of plug load— especially office equipment such as personal comput-
ers, laser printers, plotters, photocopiers, and fax machines— and increasing cooling demand,
which reflects in part the larger internal heat created by plug load, as well as increasing exterior
summer temperatures caused by air pollution and the urban heat island effect.
C02 Emissions by Commercial End Use, 1988
Office equipment 32%
Lighting 17%
Space heating 47%
Cooking .2%
Miscellaneous 1%
Refrigeration 1.7%
A Air conditioning 2%
Water heating 1 .3%
3.2 Profile of energy intensity trends
Since 1973, energy use has fallen from about 2.6 GJ/m2 of commercial floor space to
about 2 GJ in 1988, a drop of about 23 percent or 1.7 percent per year. This remains high,
however compared with other industrial countries. Commercial energy intensity in the U.S.,
for instance, averages about 1.1 GJ/m2, or about 1.2 GJ/m2 in the northeastern states, whose
climate isn't too different from southern Ontario's climate.38
The decline in commercial building energy intensity has been due mostly to the addition
of new buildings that have overall lower intensities than the existing stock, with new office
buildings in 1986 using 1.6 to 1.7 GJ/m2 according to Ontario Hydro.39 With new building
intensities today approaching 1.4 GJ/m2, a gradual decline in energy intensity in this sector is
expected to continue. The Ministry of Energy estimates that energy intensity in the office
29
building stock will decline .8 percent per year from 1988 to 2000 or a total of eight percent,
about half the rate of decline that occurred during the period 1973-1988.
3.3 Opportunities for C02Reduction
There is considerable opportunity for C02 reductions from existing and new commer-
cial buildings from a combination of efficiency savings, substitution of natural gas for electric-
ity, and use of renewable energy technologies. The efficiency savings would come from the in-
corporation of state-of-the-art heating, cooling, lighting, ventilation, and energy management
control systems into new building design and retrofits. The development and rapid expansion
of commercial markets for cogeneration would lead to natural gas assuming a share of the elec-
tricity demand for buildings. The use of renewable technologies, such as daylighting, advanced
windows, and solar water heating, could reduce energy use in buildings even further.
EFFICIENCY POTENTIAL. The energy conservation potential in Ontario's commercial
buildings has been extensively studied. Ontario Hydro conducted an assessment in the mid-
1980s which identified about 11,000 gigawatt-hours (GWh) of potential electricity savings
against a forecast assumption of 58,000 GWh in 2000, about a 19 percent reduction.40 Many
new technologies have been commercialized since that study, however, notably in the lighting
area. For instance, none of the following were available in Canada in the mid-1980s: reflective
luminaires, dimming ballasts, occupancy sensors, or compact fluorescent lamps.
A more recent study of the potential of electricity conservation to avoid the installation
of scrubbers to control acid gas emissions found a total of 16,000 GWh against a frozen effi-
ciency forecast of 52,000 GWh, a 31 percent reduction, with all of the measures costing less
than 4e/kWh.41 Constraints on the study included limitation of efficiency measures to ones that
had been evaluated in a previous study conducted by the same firm several years earlier, thus
eliminating new technologies. Furthermore, technologies and efficiency measures were as-
sumed to be taken up in buildings only at the normal rate of turnover of equipment, hence, re-
placement of iron core ballasts with electronic ballasts in lighting, for instance, was not as-
sumed to take place until the old ballasts had reached their useful 40,000 hour life tune.
The most comprehensive assessment of the CO2 reduction potential in buildings in
North America has been conducted by the U.S. Office of Technology Assessment (OTA),
which found that under a "tough scenario" emissions could be reduced by 32 percent by 2005
from 1987 levels in residential and commercial buildings altogether.42 The costs for the tough
measures would range between $53 billion net savings per year (i.e., equipment costs minus
fuel savings) to net costs of $7 billion per year. The accompanying table describes OTA 's
"tough" measures for commercial buildings.
Table 3 (a): Tough Measures for Commercial Buildings In OTA Model
Operation In existing stock:
Building retrofits 40% savings by 2000
High efficiency lighting High efficiency bulbs, net 12% savings (80% of 15% — assume
20% market already)
New Investments:
Shell efficiency of new buildings New buildings 75% more efficient than average
HVAC equipment:
Gas space heat All 92% efficient; move market share of gas heat pump forward
by 5-10 years
Electric space heat Replace 50% of new electric resistance heating space heat
with heat pump
Air conditioning Ad|ust variable speed drives and economics, net 20% savings
Cogeneration 0.64 quad by 2015
30
Water heaters Replace 100% of new electric water heaters with heat pump
water heater
Lighting Combination of high efficiency bulbs, ballasts, etc.; net 60%
savings in new, 50% in replacements
Electronic office equipment 65% savings from improved technology and 40% in reduced
idle time; total 80% savings
Accelerated turnover/new technology:
HVAC equipment Gas heat pump COP of 1.4 by 2015; electric heat pump COP of
2.4 by 2015; heat exchangers yielding 28% AC savings
Cogeneration -.96 quad by 2015 including fuel cells and improved chillers
Water heaters Replace gas water heater with 80% efficient prototype
New office buildings constructed in Ontario typically achieve a total energy intensity of
1.0 to 1.4 GJ/m2 today, but they can readily achieve 6.7 GJ/m2, half the present intensity of the
office building stock.43 The improvements in efficiency are made possible by:
lighting technologies such as high efficiency fluorescent lamps, replacement of incan-
descent lighting with compact fluorescent lamps, reflective luminaires, electronic bal-
lasts, and occupancy sensors and daylight dimming controls can achieve 75 percent re-
ductions in energy use;
installation of mid- and high-efficiency furnaces, regular boiler rune-ups, use of tabu-
lators and improved burners;
• upgrading unitary air conditioning systems, downsizing chillers, given the reduced in-
ternal heating load from lighting, and installation of "free cooling" economizers that re-
duce compressor running time;
a variety of upgrades to the ventilation equipment, such as installation of variable air
volume systems that vary the flow and volume of air according to building demands.
Case studies show that both private and institutional office buildings are being con-
structed in Ontario today that economically achieve .7 GJ/m2. For instance, the Ottawa
Courthouse and Registry, housing law courts and offices, was designed to include features
such as walls and roof insulated to R-20, triple pane insulated glass, efficient lighting tech-
nologies, and a heating, cooling, ventilation system that uses variable air volume and free
cooling economizers. The building consumes .4 GJ/m2 (not including plug load).
A recent retrofit of the Lome Mitchell Office Building in Metro Toronto will reduce en-
ergy consumption from .9 to .7 GJ per m2 (including plug load), or 25 percent, using high ef-
ficiency lighting and motors, heat recovery from exhaust air, and central heat pumps for
perimeter heating. The retrofit cost 1 .70/kWh amortized over 30 years.
Much higher reductions are being reported in the U.S. by a number of firms that spe-
cialize in commercial retrofits. For example, the Natural Resources Defense Council rehabili-
tated an industrial loft building space for new offices in 1989 in New York City, achieving re-
ductions from pre-renovation energy use in lighting energy intensity of 80 percent, cooling en-
ergy intensity of 50 percent, and heating energy intensity by 70 percent. Electricity use overall
was reduced 50 percent (including plug load). The significant reduction in lighting energy in-
tensity was achieved by combining daylighting with a continuous dimming system that adjusts
lighting to the amount of daylight present.44
FUEL SWITCHING POTENTIAL. A comprehensive assessment of cogeneration possi-
bilities in Ontario reported just a few years ago a technical potential in the commercial sector of
2,200 MW in Ontario, with 570 MW economically achievable.45 Even more economic oppor-
tunities exist today, however, due to technological advances and modestly higher buy-back
3 1
rates. There is potential for C02 reductions because natural gas cogenerated electricity can dis-
place peaking energy that comes mosdy from coal.
Despite the fact that Ontario Hydro foresees only 85 MW of potential non-parallel
commercial cogeneration in the next 10 years, Ontario companies are already seizing the busi-
ness opportunities.46 Atlas Polar, for instance, has developed a 250 kW unit using American
and Canadian components, and it is presendy tesring nine demonstration units that have a
combined electrical/thermal efficiency of 70-80 percent. The company has identified about 500
MW of technical cogeneration potential in the 1 kW to 1 MW range, and it is seeking to capture
a quarter of the market with its equipment by 2000. The unit will sell for $1,100 kW installed
and will pay back in five years.47 Once the 250 kW model reaches the market, the company
plans to develop 150 kW and 350 kW units.
Larger cogeneration units for office buildings, which do not need much heat during
warmer months of the year, will become practical once absorption chillers are introduced into
Canada, a technology that can take the heat produced by a cogeneration unit and turn it into
space cooling.
renewable ENERGY POTENTIAL. The technologies with the greatest near term po-
tential include active solar hot water service for buildings, and passive solar technologies such
as high performance windows, daylighting (coupled with dimming ballasts to attenuate light-
ing), and thermal storage. District cooling with lake water is also reviewed.
Between 1984 and 1988 Energy, Mines and Resources Canada (EMR) supported the
installation of over 170 commercial solar water heating systems across Canada, and cost and
performance data on these projects now indicates that the systems are delivering service close
to the predicted values. A recent study of the technically feasible market for active solar in
Canada indicates that commercial solar hot water could replace 8 PJ of load by 2010 in Ontario,
or about 20 percent.4*
An Ontario company, Solcan Ltd., has identified several niche markets with good po-
tential. For instance, it is marketing its commercial hot water system to nursing homes, which
have continuous need for hot water for laundry, dish washing, and bathing. Solcan's system
provides 10-to-25 percent of the hot water in such installations, or about 160 GJ for each
nursing home. Since there are about about 450 such complexes in Ontario, the technical poten-
tial for the system is close to 1 PJ.
Virtually all new commercial buildings could incorporate passive solar technologies
One Ontario Company, Conserval Engineering, Ltd., has been marketing for over a decade an
innovative building structural component, Conserval Wall, which circulates fresh air in a solar
heated wall and distributes the air throughout the building. The technology is well suited to
large, open buildings such as gymnasia and warehouses and provides up to 100 percent of the
space heating needs.
A recent EMR study estimates a large passive potential in Ontario, with 56 PJ of tech-
nical potential achievable by 2010 in existing and new buildings. Under the "reasonably
achievable" scenario, high performance windows (RSI 3+ I will be used in 22 percent of new
buildings, davlighting in 35 percent, with a small conmbunon bv thermal storage systems such
as PCM wallboard.49
Another potential renewable energy source is Lake Ontario. Toronto's downtown dis-
trict heating system, which extends from Harbourfront up to Queen's Park, is not present!)
used for cooling, but pumping 4°C water from about 70 metres of depth from Lake*Ontaru>
could meet air conditioning loads during the summer. Dubbed "Freecool", since up to 95 per-
32
cent of the energy presently used for chillers would be avoided, this system could displace
about 200 MW of peak summer demand, or the equivalent of about 7 PJ, assuming 1,000
hours/year operation. Because Lake Ontario's surface water cools to 4°C each winter and then
sinks, "Freecool" is essentially a renewable resource. The City of Toronto has already com-
missioned preliminary studies, including an environmental assessment.
In sum, recent studies have identified 71 PJ of technical renewable energy potential in
Ontario. Companies based in the province already have products for this market and are posi-
tioned to expand to meet additional demand should government and utilities encourage renew -
ables.
3.4 Measures to Reduce C02 Emissions
The economically attractive measures assumed to reduce C02 emissions are described
in detail in Appendix C. They include the following:
RETROFIT TARGETS FOR EXISTING BUILDINGS:
Efficiency scenario:
•Improvements in thermal envelope and furnaces reduce heating
energy in 50 percent of the building stock by 20%
•Reduction in cooling energy in 50 percent of the building stock by 20%
•Level Three lighting retrofits reduce electricity loads in
75 percent of building stock by 60%
•Reduction in ventilation energy by retrofitting efficient
motors in 50 percent of building stock by 25%
•Reducuon in water heaung in 50 percent of building stock by 25%
•Reducuon in cooking energy in 50 percent of building stock by 20%
•Reducuon in plug load energy in 100 percent of buildings by 20%*
Fuel switching scenario:
•Switch from oil to gas space and water heaung by 50%
•Switch from electricity to gas space and water heating by 5%
Renewable scenario:
•Retrofit commercial solar water heaung 2 PJ
•Retrofit passive solar heaung technologies,
such as advanced performance windows 5 PJ
•Implement Freecool in Toronto district heaung system,
assumes operation of 1,000 hours per annum 7 PJ
* A note about plug load: it is the fastest growing component of energy use in commercial
buildings. The U.S. Office of Technology Assessment, however, estimates that the energy
used by office equipment may be reduced by 80 percent over the next 15 years if invest-
ments in new technology are made, with 65 percent of die savings from new technology
(such as die incorporation of laptop computer technologies into desktop computers) and a
40 percent reducUon in idle time.
ENERGY INTENSITY TARGET FOR NEW BUILDINGS:
It is assumed that the average energy intensity of new buildings declines 50 percent from
die average level of the 1988 building stock, as given in Table 1. Hence, office building
stock constructed 1988-2005, for example, would average .7 GJ/m2 or 18 kWh/ft2 in
2005. Furthermore, fuel shares given in Table 9 are assumed, with solar assuming 30
percent of die space and water heating loads, and electricity declining from 13 percent
(1988) to 5 percent of die space heaung share, and from 25 percent (1988) to 10 percent
of the water heaung share.
As a result of the measures described above, CO; emissions are reduced by 46 percent
from 1988 levels. Much of the reduction indicated is due to the decline in electricity's share of
building energy — from 58 percent to 53 percent in existing buildings, for instance — keeping
33
electricity demand to a 20 percent rise (while floor space increases by 52 percent), and (ii) the
decline in the C02 emissions rate of electricity (see Appendix F), which is less than half the
emissions rate for 1988. Since the commercial sector uses a higher proportion of electricity
than any other sector, the lower electricity emission rate has the most impact in this sector. The
results are summarized in Appendix C, Table C-12.
3.5 Barriers to Achieving Measures
Despite the great potential for energy conservation in commercial buildings, this sector
has been slow to respond to the rapid pace of energy efficiency advances. This failure is a mar-
ket problem, rather than a technology problem. Energy efficient lighting, heating and cooling,
motors, energy management controls, and building envelop technologies are commonplace in
the U.S., Japan, and Europe, but not Ontario. Reasons for the failure include:
the fragmented character of the commercial building market leads architects, engineers,
and contractors to seek to minimize their liability and first costs, thereby discouraging
technological innovation and the incremental capital investment needed to reduce the en-
ergy costs associated with the operation of a building over its lifetime (which can ap-
proach the initial original cost of the entire building);
many buildings are renovated or constructed on speculation by builders who are un-
derstandably obsessed with first cost and lack interest in long-term operating cost of the
building;
• the problem of "split incentives", i.e., building owners have little financial incentive to
invest in energy efficiency retrofits, since they pass their energy costs on to the individ-
uals and firms that lease or rent space, who in turn pay a share of energy costs propor-
tional to their floor space, not the actual energy they may consume;
• credible information on commercially available technologies often does not get into the
hands of building engineers and operators or utility demand-side management man-
agers;
• the rapid growth in office equipment, especially personal computers and their acces-
sories, has accelerated "plug load" in the last five years;
• in the case of cogeneration and renewable technologies, negative attitudes and high ini-
tial capital costs tend to discourage investment in these energy forms.
Exacerbating these market barriers are outdated or non-existent provincial building code
standards in many areas of energy efficiency; a dearth of energy efficiency demonstrations that
combine a variety of advanced lighting, heating, building envelope, and control components
into an overall system; and lax or non-existent municipal oversight of energy practices in the
building sector.
3.6 What Ontario Can Do
The province can achieve the measures needed to reduce CO; reductions in this sector
can by:
amending the provincial building code to require more thermally efficient building en-
velopes and to encourage more use of renewable technologies in building design;
establishing financial incentives and disincentives to spur building owners to construct
and maintain energy efficient buildings.
regulating the efficiency of commercial lighting, refrigeration, furnaces, and water
heaters under the Energy Efficiency Act:
promoting policies that encourage commercial cogeneration and renewable enc
education programmes for architects, engineers, and building managers.
34
Efficiency Strategies
The province should take steps to ensure that the opportunities for energy efficiency in
new construction are not lost, by embarking on progressive amendments to the provincial
building code to establish prescriptive and performance standards for all categories of com-
mercial buildings and by pursuing minimum efficiency regulations for commercial heating,
cooling, and lighting equipment. In addition, the province should undertake a major
programme to retrofit existing provincial and municipal buildings.
ADOPT ASHRAE 90.1 IN THE PROVINCIAL BUILDING CODE. With respect to the
provincial building code, the province should move immediately to implement ASHRAE's
commercial standard 90.1. In 1989, the American Society of Heating, Refrigerating and Air-
Conditioning Engineers, Inc. (ASHRAE) and the Illuminating Engineering Society of North
America published a new standard, ASHRAE 90.1, that sets minimum requirements for the
energy efficient design of new commercial buildings. It specifies basic engineering require-
ments for electric power, lighting, HVAC, building envelope, water heating, and energy man-
agement of a variety of building types and U.S. climate regions.
Even though many elements of the standard reflect 5-to-10 year old technologies,
buildings constructed in accordance with ASHRAE 90.1 are expected to use 30-40 percent less
energy than present building stock average. Several cities, including Seattle, San Francisco —
and in March, 1991, Toronto — are in the process of incorporating the standard into local
building requirements.
The applicability of ASHRAE 90.1 to Ontario would require calibrating the code to the
province's weather regions and its adapting to Canadian building practices. Implementation of
the standard will lower energy intensities of new office buildings to about 1 GJ/m:, about half
way towards the .7GJ/m2 cumulative target needed in new office buildings 1994-2005 to
achieve the CO2 reduction measures indicated above.
Since the ASHRAE standard is not particularly strong in the lighting area, revisions to
the building code should incorporate lighting standards such as those found in the California
Building Code, Section 2-5342.50
The provincial building code should also provide that the electrical system in new
buildings be "sub-metering" friendly, allowing for flexibility in system layout so that individual
offices can be easily sub-metered on each floor. This would be a prelude to utility reform that
requires sub-metering of commercial customers, so that high users of energy, such as firms
that have high plug loads, pay their fair share of energy costs.
DEVELOP A HOOK-UP FEEBATE PROGRAM FOR NEW BUILDINGS. The province
should also implement a feebate programme that requires building owners to pay fees for
electricity and natural gas hook-up, the amount of the fee proportional to the amount of energy
the new building is designed to consume relative to a performance standard. If the building
owner designs an efficient building, the owner would receive a rebate, again the amount
proportional to the savings relative to the standard. The program would be revenue neutral,
with provincial administrative costs being paid out of fees collected.
The feebate performance standard would be based on life-cycle cost analysis, which
would assess the full costs and benefits of an energy system, discounted to present value, in-
cluding the capital investment, full projected lifetime operating and maintenance expenditures,
as well as the projected environmental and other external costs and benefits of the system. The
province should develop a life-cycle analytical tool that it and municipal governments can use to
evaluate new development projects, as well as retrofit programmes.
35
The feebate standard would be based on greater energy efficiency than the building
code standard, and it would anticipate changes in the building code by several years. In this
way, the market — and builders — would be encouraged to explore new technologies, and be
rewarded for doing so, several years before the province requires the energy efficiency gains
made possible by such technologies in its building code.
As a model, the province should examine the Massachusetts hook-up fee program (for
electricity only and buildings greater than 50,000 sq. ft.), which is likely to become a state law
this year.51
RETROFIT EXISTING GOVERNMENT OWNED BUILDINGS. The province should un-
dertake a major effort, funded by utilities at their full avoided cost, to retrofit government
owned buildings in Ontario with high efficiency heating and ventilation systems, lighting, mo-
tors, and other equipment. Toronto has already begun such an effort with respect to its own
building stock, coordinated by its energy efficiency office, and Ottawa may also be developing
a similar initiative soon. Local municipal efforts such as these would benefit greatly from a
province-wide strategy led by the Ministry of Energy, involving training programmes, coordi-
nated funding from utilities, and strategic procurement of advanced energy efficiency, cogen-
eration, and renewable energy technologies.
REGULATE ENERGY EFFICIENCY OF COMMERCIAL EQUIPMENT. The province has
yet to use the Energy Efficiency Act to regulate commercial equipment. It should begin to do
so, starting with commercial lighting fixtures, ballasts, and lamps, examining what
Massachusetts has already done as one possible model.52 One promising route would be to set
performance standards for luminaires and lighting systems as a whole, rather than (or in addi-
tion to) prescriptive standards for each component. While ASHRAE 90.1 goes a step in this di-
rection, presently available technologies should permit much stronger lighting efficiency regu-
lation. California is one of several states that has recognized this and has already adopted
stronger lighting standards in its building code.53 Since the potential for CO; reduction from
improved end use lighting are so dramatic, the province should give high priority to this initia-
tive.
Fuel Switching Strategies
Recent studies indicate that attitude and economics are the primary barriers to the devel-
opment of cogeneration in Ontario.54 The attitude in the private sector is that "electricity is not
our business", reflecting the centralized position that Ontario Hydro occupies in the minds of
business people. This attitude is reinforced by Ontario Hydro's lack of interest in commercial
cogeneration. Though it could be a good load displacement strategy, the commercial efficiency
branch of Ontario Hydro is prevented by corporate policy from exploring this option further.
Building owners are reluctant to become power producers also because they are looking
for short three year or less payback on their investments. Cogeneration systems, on the other
hand, may take five years or more to pay back. The exception may be institutional building
owners, such as schools, governments, and hospitals, who tend to take a longer-term perspec-
tive on capital investments.
A variety of financial incentives could be useful in encouraging cogeneration. A fast
three year write-off for cogeneration equipment is already available. Additional measures might
include investment grants to shorten the payback period, investment tax credits, and loan guar-
antees. The best stimulus, however, would be an Ontario Hydro parallel generation "buy back"
rate that truly reflects the cost of new generation supply and its environmental costs.
36
Renewable Energy Strategies
The same barriers apply to renewable energy technologies, only there are even more
negative attitudes to overcome. Solar technologies are often viewed as contraptions of the six-
ties and seventies "granola" generation, not quite realistic today. This attitude is likely rein-
forced by the fact that most of Ontario's solar companies failed during the 1970s, leaving no
one to service the many installations that were made.
The province's remaining solar companies emphasize the importance of avoiding the
pitfalls of previous government policies that were intended to promote solar but inevitably did
them in. The emphasis on cost cutting to make the technologies more competitive left many
firms bankrupt. The federal PUSH programme comes under particular criticism, since design
contracts were let to large firms that had tittle solar experience, so they tended to err on the side
of over capacity, leading to many installations that were over sized and over priced. The image
of uncompetitiveness was created, in part, by the very programs seeking to promote solar.
What is needed to revitalize the industry in Ontario is, first, high profile demonstrations
that help building owners regain confidence in the technologies, and second, financial and
regulatory policies that promote solar. One promising approach would be for the province and
utilities to set up a leasing programme that spreads the initial capital costs of the system over an
appropriate period of time. On the regulatory side, the proposed hook-up fee programme for
new buildings could include a credit for the use of energy derived from renewable sources.
The province is fortunate to have a number of consulting firms that specialize in solar
technologies. The Ministry of Energy, as it studies the potential for renewable energy in the
province, should utilize the knowledge and experience these firms have and help build the de-
sign and engineering base needed for an expansion of this industry in Ontario.
3.7 Economic and Social Implications
Building owners are likely to object that the energy hook-up fee programme makes their
new commercial space less competitive with existing space, since somewhat higher capital
costs will be associated with more energy efficient buildings. There are several ways, how-
ever, that costs might be equalized between new and old buildings, while encouraging greater
energy efficiency in existing buildings. One option would be to raise commercial electricity
rates, which would benefit lessees of new, more energy efficient commercial space compared
with lessees of older, less energy efficient space. Another option might be to require lessees of
existing space to pay for sub-metering when a new lease is signed.
The public is most likely to be affected by policies in the commercial sector from the
way these policies impact on buildings owned and operated by institutions such as schools,
colleges, public recreational facilities, and hospitals. Since efficiency, cogeneration, and re-
newables are likely to lower the long-term operational costs of these facilities, the public will
surely benefit.
ENDNOTES
"Ontario Ministry of Energy, Ontario's Energy-Related Carbon Dioxide Emissions, Report to
the Inter-governmental Task Force on Energy and the Environment (March 1990)
38Howard S. Geller, Commercial building Equipment Efficiency: A State-of-the-Art Review,
American Council for an Energy-Efficient Economy (ACEEE), Washington, D.C. (May,
1988) and Radu Zmeureanu, "Database of the Energy Performance of Office Buildings in
37
Montreal", In: ACEEE 1990 Summer Study on Energy Efficiency in Buildings Proceedings,
Volume 3, Washington, D.C. (1990)
39Michael Singleton, 1990 Commercial Sector End-Use Forecast, Ontario Hydro, Toronto
(December 1990)
40Gary A. Schneider, Strategic Conservation in the Commercial Sector, Ontario Hydro,
Economic Studies Section, toronto (November 1986)
41Ontario Ministry of Energy, Electricity Conservation and Acid Rain in Ontario, prepared by
Marbek Resource Consultants Ltd., Toronto (March 1989)
42U.S. Office of Technology Assessment, Changing by Degrees: Steps to Reduce Greenhouse
Gases, OTA-O-482, Washington, D.C. (February 1991)
■"Marbek Resource Consultants, Inc., Remaining Energy Conservation Potential in Canada:
Commercial Sector Case Studies, Ottawa (October, 1990)
"Robert K. Watson, "Case Study in Energy Efficient Office Renovation: NRDC's
Headquarters in New York City", In: ACEEE 1990 Sumer Study on Energy Efficiency in
Buildings Proceedings, Volume 3, Washington, D.C. (1990)
45Ontario Ministry of Energy, Cogeneration Potential in Ontario and Barriers to its
Development, report prepared by Acres International Ltd., Toronto (February 1987)
■^Ontario Hydro, 1990 Non-Utility Generation Plan, Corporate Planning Branch, Toronto
(September 1990)
•"Information provided by Atlas Polar
48Energy, Mines and Resources Canada, Active Solar Heating in Canada to the Year 2010,
prepared by Enermodal Engineering Ltd, Ottawa (1990)
"Energy, Mines and Resources Canada, Passive Solar Potential in Canada, prepared by
Scanada Consultants Ltd., Ottawa (1990)
50California Energy Commission, Building Energy Efficiency Standards, 1988 Edition,
Sacramento, California (July 1988)
51 Commonwealth of Massachusetts, Joint Committee on Energy, An Act Promoting Energy
Efficiency in New Buildings, H. 2974, Boston (1990)
"Steven Nadel, Howard Geller, et.al.. Lamp Efficiency Standards for Massachusetts: Analysis
and Recommendations, Massachusetts Executive Office of Energv Resources, Boston (June,
1989)
"California Energv Commission, Building Energv Efficiency Standards: 1988 Edition,
Sacramento (July 1988), Section 2-5342(d), pp.90-'l00
"Ontario Ministry of Energy, Cogeneration Potential in Ontario and Barriers to its
Development, report prepared by Acres International Ltd., Toronto (February 1987)
3 R
CHAPTER 4— TRANSPORTATION SECTOR
"The elevated section of the Gardiner-Lake Shore Expressway should be taken
down, in a phased programme, over the next 20 years."
Recommendation of the Royal Commission on the Future of the
Toronto Waterfront, Hon. David Crombie, Commissioner
4.0 Introduction
There are approximately 4.6 million passenger automobiles and 1 million trucks regis-
tered in Ontario. Together with other transportation modes, including public transit, air planes,
and ships, Ontario's transportation sector consumed a total of 675 petajoules (PJ) of energy in
1988, about 18 percent of the province's total. The Ministry of Energy forecasts the total num-
ber of passenger vehicles to increase to 6.5 million by 2005.
4.1 Profile of CO 2 Emissions
In 1988 Ontario's transportation sector produced about 46.3 megatonnes (Mt) of CO;
emissions, 28 percent of the province's total. Almost all of the emissions comes from the con-
sumption of petroleum. Passenger automobiles account for almost half of transportation's car-
bon emissions and about 13 percent of Ontario's total. Motor vehicles altogether account for
about almost a quarter of the province's carbon emissions.
Transportation C02 Emissions by Mode, 1988
». oo/ ^ Other 1%
Manne 3%
Airplanes 10%
Rail 47c
Buses 1%
Automobiles
47%
Trucks
25%
Light trucks
8%
Ontario's automobiles each annually consume an average of 64 GJ of energy and each
emits annually 4.7 tonnes of CO2. Of all Ontario's end use sectors, transportation is the most
carbon intensive, producing about 69 tonnes of CO; per MJ of energy consumed.
By 2005, CO; emissions from Ontario's transportation sector are expected to rise 29
percent, according to Ministry of Energy forecasts. The estimate assumes there will be modest
improvement in the fuel efficiency of motor vehicles over the period, about 11-15 percent —
39
less than one percent per year — while the average distance vehicles are driven will decline
about 3 percent by 2005. Modal shares of automobile and public transit, as well as automobile
load factors remain relatively unchanged in the forecast. Natural gas use is estimated to rise ten
fold, though it still remains a minute share of the motor fuel market. After 2000 alcohol blends
begin to play a role, and by 2005, 10 percent of gasoline has a 10 percent blend.
The primary factor driving the rise in fuel use and carbon emissions is the rise in the
total stock of vehicles, a 2.1 annual average change reflecting populanon growth.
While reducing C02 emissions is the theme of this paper, it should be noted that motor
vehicles produce a variety of other emissions that contribute to global warming direcdy or indi-
recdy.55 They include:
chlorofluorocarbons (CFCs) used in automotive air conditioning;
nitrous oxide (N20), a greenhouse gas that is 200 times more powerful than C02on a
molecule basis;
methane (CH4), a greenhouse gas which is about 20-40 times more powerful than CO;
(emissions are associated particularly with natural gas vehicles);
hydrocarbons (HCs) and nitrogen oxides NOx, which react under the influence of heat
and sunlight to form tropospheric ozone, a greenhouse gas;
carbon monoxide (CO), which neutralizes other atmospheric gases, such as hydroxy]
(OH), that serve the important purpose of limiting the life span of other greenhouse
gases, such as methane, in the atmosphere.
Scientific concern about CO has recently emerged.56 This pollutant is not only poi-
sonous and a serious health hazard, but evidence suggests that a gram of CO has a greater in-
fluence on global warming than a gram of CO:, for two reasons. First, CO increases the life-
time of atmospheric methane by 20 percent by neutralizing hydroxl. Second, CO eventually
converts to C02. The overall impact of a molecule of CO, may be 2.2 times that of a molecule
of C02. Recent evidence of a decline in hydroxl in the northern hemisphere has amplified sci-
entists' alarm about CO.57 Some of the measures proposed, such as greater use of ethanol
blends, would have the added benefit of reducing emissions of CO (and the formation of
ground-level ozone), as well as C02.
The high carbon intensity of Ontario's transportation sector and the fact that motor ve-
hicle emissions contribute to global warming in many other ways (not to mention air pollution
problems generally) suggest that this sector should receive a high priority in the province s
global warming strategy.
4.2 Profile of Energy Intensity Trends
New vehicle purchases and driving habits in recent decades have been strongly related
to two post-World War trends: the baby boom and growth of the two-income household. In
Canada, since 1970 the proportion of the driving age ( 16 or older) population has been increas-
ing, and the female labour force has been climbing faster than the male labour force. The result
has been a more rapid increase in the labour force in the 1970s than the 1960s and the growth
in multiple-car households.
These trends have helped promote a steady increase in the number of autos in Ontario.
Indeed, Ontario's personal auto stock has been climbing faster than households over the 1961-
1981 period. Since the mid-1970s there have been more personal autos in Ontario than house-
holds. In addition, the total distance Ontanans drive their cars, both for personal and commer-
cial uses, has increased steadily, primarily because urban centres have sprawled into suburbs,
while the average mileage each per person drives their car has also nsen over the period.
40
These socio-economic trends produced stcadilv rising gasoline consumption in the
1960s The pnee effects of the 1973 and 1981 OPEC oil shocks, however, coupled with new
Canadian road taxes, and U.S. and Canadian Corporate Average Fleet Economy (CAFE) stan-
dards caused gasoline consumption to level off in the late 1970s and to decline in the early
1980s, as more fuel efficient cars went on the road.58
Auto Energy vs. Economic Trends, 1973-1988
1973-1.0
73 74 75 76 77 78 79 80 81 82 83
85 86 87 88
Until the early 1980s energy use in transportation was closely correlated with the
province's GDP. In 1980, when Canada's voluntary CAFE standards took effect, gasoline use
dropped and decoupled from GDP. During the 1980s, although the total number of motor ve-
hicles registered in the province has been increasing, gasoline sales have remained relatively
constant (See accompanying graph.) They will begin rising significantly once the fuel effi-
ciency of the province's total car stock catches up with the fuel efficiency of new cars, whose
mandated level has remained unchanged since 1985.
Unless oil prices rise significantly during the 1990s, these trends are not likely to abate
without direct government intervention, and gasoline use, along with it transportation energy
use, will begin rising inexorably.
4.3 Opportunities for C02 Reduction
Significant gains in the efficiency of transportation modes, especially the passenger
automobile, have been made over the last 15 years, and technologies permitting use of cleaner
alternative fuels have also been developed, commercialized, and are now in wiae : use in parts Oi
the world Recentlv, the Big Three North American auto makers announced a S100 million K
& D initiative to commercialize a feasible, cost effective battery to permit electric cars to become
commonplace after 2000. Much of the technology development is now being compelled by
southern California's stringent vehicle emissions standards and rising public concern about
deteriorating urban air quality throughout North America.
41
EFFICIENCY POTENTIAL. Wider employment in the 1990s of a variety of technologies
now available in existing models or proven in prototypes could improve the average fleet econ-
omy of new automobiles from the present 8.7 litres/100 km to 6.7 litres/100 km, without de-
grading ride, performance, or capacity over 1987 levels, at an average cost of 14 cents per litre
of gasoline saved.59 Although the additional cost of a new car to the consumer would be about
$1,000, the efficiency investment would pay the car owner back in three-to-five years depend-
ing on driving habits.
While auto manufacturers maintain that improved fuel economy means smaller cars, it
appears that many of the new technologies are now being used to increase power and perfor-
mance, while allowing the manufacturers to comply with U.S. Corporate Average Fuel
Economy (CAFE) standards. Between 1988 and 1990, for instance, there was a four percent
decline in the fuel economy of the passenger car fleet sold in the U.S., while horsepower in-
creased by an average of 10 percent, and weight increased by six percent.60 Assuming power
and performance remain constant, however, employment of the technologies would increase
fuel economy over time.
TABLE 4 (a): Impact of Fuel Economy Technologies on Cost and Fleet Average
•Roller cam followers
•Overhead cam engine
•Intake valve control
•Front wheel drive
•4 valves/cylinder
•Improved accessories
•Aerodynamic improve-
ments
•Torque converter lockup .
electronic emission con-
trol
•Multi-point fuel injection
•Engine friction reduction
•Continuously variable
transmission
•Improved lubricating
fluids
•5-speed automatic
overdrive transmission
Incremental
Cumulative
Consumers
Annual
Market
efficiency
EPA fleet
cost
cost
share
of vehide
Economy
(US$)
(U.S.S)
(U.S.mpg)
(U.S.mpg)
$15
$2.06
37%
0.3
28.4
$74
$10.14
69%
1.19
29.6
$80
$10.96
75%
1.24
31.0
$150
$20.55
23%
2.17
31.7
$105
$14.39
1 00%
1.51
33.8
$29
$3.97
80%
04
34.3
$80
$10.96
85%
1.1
35.6
$39
$67
$80
$100
$22
$150
$5.34
$9.18
$10.96
$13.70
$3.01
$20.36
75%
56%
80%
45%
1 00%
40%
0.55
089
1.03
1.25
0.27
1.29
36.2
36.9
38.1
38 9
39.3
40.0
Note: 40 mpg =5.8 litres! 100 kilometres
The technologies that would most cost effectively improve fuel economy are those
which reduce transmission weight (front wheel drive), boost engine horsepower (four valves
per cylinder), lower engine inertia (overhead cams), optimize valve timing and lift for different
speeds and loads (intake valve control), and reduce aerodynamic drag, all without reducing the
size or performance of the car. The accompanying table describes the impact these technologies
would have on fuel economy and cost.
In Canada, use of all the technologies described would add about $1,150 to the cost of
a new car and about $160 to the annual operating cost of the car, mostly in financing costs. The
technologies, however, would save about 435 litres of fuel annually, assuming 15,000 kilome-
42
tres average distance driven, that would otherwise cost about $260 annually at 60c/litre. The
net annual saving to the new car owner, therefore, would be about $100.
Even larger efficiency gains would be possible in the passenger car fleet were the public
willing to accept smaller, lighter, and less powerful cars as second vehicles. While such cars
mav have more limited application, they would be very suitable for some purposes such as ur-
ban commuting and use. The question of safety concerns anse however The LS. National
Highway Traffic Safety Administration analyzed single-car crashes for 1970-1989 and found
that in rollover crashes' smaller cars had an increased risk of fatal injury of about a third, while
in non-rollover crashes reduced car weight had little or no effect on the nsk fatality.61 Over the
past 15 years however, U.S. road deaths saw a 33 percent decline in the rate per vehicle
miles during a period when the average weight of vehicles declined by 1,000 pounds. It
would appear that a combination of better engineering, seat belt use, and crackdowns on
drunken driving can offset the safety risks associated with an increase in smaller, lighter vehi-
cles on the road. Nonetheless, consumers may continue to be reluctant to purchase smaller
cars.
Population and job densities also significantly affect automobile energy use and emis-
sions A landmark 10-year study by Peter Newman and Jeffrey Kenworthy provides excellent
documentation as to the relationship between land use, public transit infrastructure, and energy
consumption in cities.62 They have gathered, analysed, and compared transportation and en-
ergy data from 32 cities around the world, including five Australian, 10 American, one
Canadian (Toronto), 13 European, and three Asian cities. They found that the factors com-
monly thought to explain urban gasoline demand, such as income, city size, and fuel price, fail
to explain differences among cities. Those factors which do explain such differences in gaso-
line demand, as well as per capita car use and public transit use, include density of population
and jobs, parking supply, road supply, and other infrastructure indicators. Their main findings
are that:
• great variation in per capita gasoline use exists among different cities, with the average
American city consuming about twice as much gasoline as Australian and Canadian ci-
ties, three times the average European city, and 10 times the average "westernised
Asian city;
• differences in gasoline use correlate inversely with population density, i.e., higher uses
of gasoline typically characterize lower density cities and vice versa;
• the provision of road supply is strongly correlated with total vehicle ownership, gaso-
line use and virtually all other vehicle indicators used in the survey;
• a strong correlation exists between rapid rail public transport and lower private auto ori-
entation and gasoline use.
Newman and Kenworthy's extensive statistical analysis leads to several important con-
clusions First, land use policies that encourage higher population densities in cities are likely
to lead to lower gasoline use per capita. Second, building more roads to solve congestion
problems mav only lead to greater auto dependence, congesnon, and higher levels of gasoline
consumption' As a corollary, however, congestion that is allowed to persist by limiting new
road supply may serve as a useful means of encouraging people to switch to public transit and
bicycles. Finallv, rapid rail systems may be the only way to ensure higher, auto-competitive
speeds for public transit, since buses and streetcars tend to get slowed in traffic.
Since Ontario is highly urbanized, with almost half the province's population living in
the Greater Toronto Area (GT A), whether and how future growth and development is guided
in these areas will significantly impact on future transportation energy use and CO; emissions.
With policies to increase densitv in the GT A— particularly in Metro— and other urban centres
combined with initiatives to significantly expand public transit, especially rapid rail, the goal ot
43
stabilizing vehicle kilometres travelled in these centres would be feasible, as presented by the
analysis in Appendix E. Indeed, without such gains, urban air pollution is destined to worsen
towards the year 2000, as reductions of pollutants such as NO,, CO, and HCs bottom out from
improved tailpipe controls under the new federal regulations.
FUEL switching POTENTIAL. Alternative fuels also hold great promise for carbon
reduction in transportation. Natural gas, for instance, contains a third less carbon than
petroleum fuels on an energy unit basis. In practice, however, estimating their greenhouse re-
duction potential is somewhat complicated, since a variety of factors may affect the overall en-
ergy balance of a fuel's production, distribution, and eventual end use.
Methane leakage may occur from well head to end use, for instance. Since methane is
20-30 times more potent as a greenhouse gas than CO:, seemingly small amounts of leakage
can offset any reduction in carbon emissions that occurs from switching to natural gas from
petroleum. In addition, significant energy is required to compress the natural gas for distribu-
tion through long pipelines.
Despite these caveats, fuel switching does offer considerable potential for carbon re-
ductions in transportation, if energy inputs into production and distribution can be kept to a
minimum, and leakage can be reduced by employing existing end use technologies that opti-
mize the fuel to promote complete combustion.
Reaching towards a 10 percent penetration of natural gas into the automobile market is a
feasible goal for 2005, as the market gears up to meet a significant increase in demand for such
vehicles in California over the next decade.
renewable ENERGY potential. Ethanol as a motor fuel offers significant envi-
ronmental benefits over fossil fuels, since it is produced from biomass. A number of countries
already have considerable experience with ethanol. They include Brazil, the U.S. Mid-west,
and other provinces, such as Alberta and Saskatchewan.
Ethanol is an alcohol fuel, and it can be made from corn, wood, or municipal solid
wastes. It can be used up to a 10 percent blend as an octane enhancer in gasoline, without any
modification of the engine, or as a "neat" fuel on its own, in a modified or dual fuel engine.
Other applications also exist which might serve to reduce greenhouse emissions, including use
of ethanol, instead of fossil fuels, as a chemical feedstock and production of ethanol from the
non-plastic fraction of municipal solid waste, thus reducing methane leakage from landfills. If
the ethanol is produced from crops grown on a sustainable basis with a minimum of energy
and chemical inputs, its use can reduce CO; emissions up to 100 percent, since the CO; that is
released to the atmosphere would be reabsorbed by the next crop.
The global warming advantages of ethanol may be diminished, however, by the sub-
stantial use of energy that could be required to plant, fertilize, culnvate, and harvest crops used
as feedstock. This is particularly the case with ethanol made from com.
However, the production of ethanol from lignocellulose crops, such as wood, crop
residues, grass, and municipal solid wastes seems to hold greater promise.63 These feedstocks
are not only available in greater quantity and at less cost than starch feedstocks like corn, the
energy required to produce them is negligible.
Ethanol made from lignocellulose, assuming economics are right and land
use/environmental impacts can be minimized, could represent a major new industry for On-
tario. An Ontario company, Iogen Corporation, is a world leader in the development of the
conversion technology, and it operates a small demonstration plant outside of Onawa. It is mm
44
ready to scale up the technology and is presently seeking partnerships to finance construction
of a larger plant that would produce ethanol and generate electricity from the wood waste from
the process.
4.4 Measures to Reduce CO2 Emissions
The economically achievable measures assumed to reduce CO2 emissions from trans-
portation are explained in Appendix C. The analysis is limited to measures for passenger cars
and public transit. They include the following:
FUEL ECONOMY OF TRANSPORTATION:
•By 2005 average on-road auto stock efficiency improves
from 11.4 litres/100 km in 1988 to 6.7 1/100 km
•In order to achieve the above target a gas guzzler/sipper
rebate programme is implemented by 1993 that aims to
achieve by 2000 an average measured (as opposed to actual
on-road) new car provincial fleet economy of 6.1 1/100 km
•After 2000 the gas guzzler/sipper rebate programme aims to
achieve annual improvement in new car provincial
average fuel economy of 5-6% per annum
•Provincial and Metro policies encourage significant
investment and expansion in public transit to achieve
by 2005 a modal shift from autos to public transit in GTA of 15%
SWITCHING TO NATURAL GAS:
•Policies encourage strong initiative by gas industry and
utilities and auto industry to encourage 1 0 percent of
passenger auto stock to be fueled by natural gas by 2005
RENEWABLE FUEL:
•Policies aim to encourage use of 10 percent ethanol blend
in 100 percent of auto stock (except natural gas and diesel
vehicles) by mid-1990s
•R&D aims to commercialize production of ethanol from
lignocellulose so that no net C02 emissions occur from its use by 2005
The measures result in a reduction of CO? emissions from passenger automobiles of 33
percent from 1988 levels, or 6.3 Mt of CO2. The cumulative reductions for each of the mea-
sures is shown in the following table.
Table 4 (b): Summary of C02 Reductions for Passenger Autos
Measure
Fuel economy
GTA 15% modal shift1
Natural gas vehicles
Ethanol blend
TOTAL
'Net of an increases in CO2 emissions of .25 Mt from public transit.
4.5 Barriers to Achieving Measures
The primary market barrier to the achievement of greater efficiency in passenger auto-
mobile transport are continuing low energy prices. While the public complains about federal
co2
%
reduction
share
(Mt)
3.9
62%
0.7
10%
0.4
6%
1.3
21%
6.3
100%
45
and provincial gasoline taxes, motor fuel prices are not only lower than in most other industrial
nations (the notable exception being the U.S.). but in real terms they are no higher than they
were 30 years ago. Furthermore, since the average fuel economy of automobiles has improved
significandy over the last 15 years, car owners don't have to buy as much fuel. The overall
proportion of fuel costs in the operating expense of a car has also declined. It is not surprising
that the public is growing more responsive to advertising that promotes high performance and
utility vehicles that are less fuel efficient.
The market barriers to natural gas vehicles are related more to the present lack of an ad-
equate gas distribution system for such vehicles, their somewhat more limited operating range,
and a small sacrifice in performance. The commercialization of the home refueling appliance
and technical advances in storage and carburation, however, should change this picture by the
mid-1990s, improving the outlook for natural gas vehicles. Gas utilities, however, remain
mostly interested in the fleet market, and regulatory incentives to encourage leasing of home re-
fueling appliances to consumers may be necessary to allow more significant penetration of nat-
ural gas vehicles for personal transportation.
No technical barriers exist to the use of ethanol blends, which have been widely used in
the U.S. and other countries for many years. Indeed, from the point of view of the consumer,
the economics of ethanol appears very favourable. Ethanol in a 10 percent blend as an octane
enhancer is worth 47 cents per litre (compared with 22-25 cents a litre wholesale for gasoline at
a world price of oil of $18) while large-scale ethanol production costs 37 cents a litre. From an
industry point of view, however, the marginal cost of ethanol is greater than the marginal cost
of petroleum-based additives, so oil companies oppose ethanol's use because it reduces their
profit margins and makes them reliant on non-petroleum feedstock.64 In other jurisdictions,
therefore, governments have had to subsidize the oil companies to get them to accept ethanol.
One important consideration presently is the fact that the U.S. presently can export
ethanol into Canada freely, however, there is a U.S. tariff against Canadian ethanol that won't
come down for some years under the Free Trade Agreement. The government would have to
be careful to regulate in such a way that Canadian production, rather than American imports of
ethanol, are encouraged.
4.6 What Ontario Can Do
Ontario should be able to significantly reduce carbon emissions in transportation by
adopting measures:
• to improve the fuel economy of motor vehicles registered and used in the province;
to substitute lower carbon fuels or ethanol for petroleum fuels;
to intensify the population and job density of the province's urban areas that encourages
a significant shift to public transit, bicycling, and walking, and;
to expand in a significant way public transit and high occupancy vehicle infrastructure
in the Greater Toronto Area (GTA) and other urban areas, and to expand existing or to
establish new regional rail links between urban centres.
The primary strategies underlying these measures should be to reduce dependence on the auto-
mobile, aiming towards stabilization of vehicle kilometres travelled in Ontario s urban areas,
and to move eventually towards the wide use of lower polluting alternative fuels in road trans-
port.
improving vehicle FLEET fuel economy. Ontario has two options to encourage
improvement in the fuel economy of light duty vehicles registered in Ontario. Under the Energy
Efficiency Act. Ontario has the authority to set efficiency standards for vehicles sold anywhere
46
in the province. Alternatively, Ontario could modify its gas guzzler tax programme to provide
much stronger incentives for consumers to buy cleaner, more fuel efficient cars and light
trucks, by establishing a fuel economy "feebate" programme. Combined with a new initiative
to scrap the worst polluting, least fuel efficient vehicles from the road, the two measures could
significantly improve the average fuel economy of the province's passenger car stock by 2000.
These ideas come from two California initiatives: DRIVE+ and SCRAP. The DRIVE+
programme (Demand Reductions in Vehicle Emissions Plus improvements in fuel economy)
will allow the state to set goals for all new vehicle emissions, including CO2, and to annually
adjust the incentives to achieve these goals. Legislation to establish the programme was enacted
by the California legislature in 1990, but it was vetoed by the state's previous governor. The
new governor, Pete Wilson, has indicated he will sign a new bill, once the state legislature puts
it through.
Applying the concept in Ontario would not be difficult. The Province would offer a
sales tax rebate to consumers who buy autos and light-duty trucks that have lower-than-average
emissions of CO2 (other pollutants could be included also). The programme would be paid for
by sales tax surcharges levied on purchasers of vehicles that have higher-than-average emis-
sions.65 The province's administrative costs would be deducted from the surcharges collected.
Calculation of the appropriate rebates and surcharges can initially be based on estimat-
ing avoided cost of reducing emissions by other means. Such a calculation, using the study's
assumptions for California's vehicle market, when performed on the cars manufactured in
Canada, results in market shifts indicated in the accompanying table, assuming the programme
were applied all across Canada, not just in Ontario.
Table 1: Effect of DRIVE+ on Autos Manufactured In Canada, 1990
Percent Change
Manufacturer
No. built
No. told
No.
Total
C02
change
in sales
Model
Canada
Canada
exports
L/100
km
g/ml
In sales
Canada
Chrysler
25276
517
24159
20
Jeep Premier
11613
517
11096
8.71
390
3.93%
20
Jeep Monaco
13663
0
13063
8.71
390
3.93%
0
Ford
385238
38993
346245
-2763
Tempo
109965
14296
95669
8.11
385
-3.41%
-487
Crown Victoria
120414
6502
113912
11.20
497
-4.85%
-315
Mer. Topaz
40623
10978
29645
8.78
384
-17.18%
-1886
Mer Grd. Marquis
114236
7217
107019
11.20
489
-1.03%
-74
General Motors
415671
36951
378720
-46
Olds Cirtlass Ciera
76721
13191
63530
8.68
403
2.45%
323
Chevrolet Celebrity
20335
1325
19010
8.08
338
0.42%
6
Chevrolet Lumina
216991
14803
202188
10.05
n/a
n/a
0
Buick Regal
101624
7632
93992
8.81
417
-4.91%
-375
SUB-TOTAL
826181
76461
749124
■2789
Honda Civic
104582
9726
94856
6.26
294
4.74%
461
Hyundai Sonate
27409
7400
20009
8.78
404
-1.32%
-98
Volvo 740 Series
8081
3303
4778
9.05
399
-5.50%
-182
Toyota Corolla
60793
5654
55139
6.96
297
2.48%
140
Suzuki Swift
46606
4334
42272
5.24
262
13.65%
592
SUB-TOTAL
247471
30417
217054
914
TOTAL
1073656
106878
966178
■1875
47
The short run effect of the programme on the fuel economy of new cars sold in Ontario,
if the same price elasticities assumed in the California study held up locally, would be to
achieve an improvement in the average fuel economy of new cars sold in Ontario of 8.7 1/100
km to about 8.3 1/100 km. A reasonable goal for DRIVE+ would be to recalculate the fees and
rebates each year to maintain the same rate of improvement through the next ten years, with the
goal of achieving an average fuel economy of new cars sold in Ontario of 6.1 1/100 km by
2000.
The analysis indicates that implementing the programme throughout Canada would lead
to a total net loss in sales of 1,875 cars. One car in particular, the Mercury Topaz, carries the
brunt of the decline, largely because its emissions of NOx, HCs, and CO are unusually high
(almost 60 percent below the "zero" point); its CO? emission rate isn't that bad. If the Topaz
had the same emissions rating as its cousin, the Tempo, the decline in Canadian car sales
would be only 364 cars.
While the sale of cars made in Canada sold to Canadians would decline about 6 percent,
this represents less than one percent of all Canadian manufactured cars. Hence, while sending a
strong signal to the manufacturers of cars that the public wants more fuel efficient cars, the im-
pact of DRTVE+ on Ontario's manufacturing industry and jobs would appear to be negligible.
Notwithstanding what Ontario can do through the market to encourage consumers to
buy more fuel efficient autos, federal regulation of auto and truck fuel economy in both the
U.S. and Canada will be essential over the long-term to improving North American vehicle fuel
economies. Ontario's leadership (along with California and other states or provinces that might
follow suit), however, can send strong market signals to auto manufacturers that, even in the
absence of the federal will to act, spur changes in design and engineering to improve the fuel
economy of new models.
In addition to the fuel economy feebate programme, an initiative to scrap old vehicles
should be explored on a demonstration basis in cooperation with Ontario's petroleum indus-
tries, auto manufacturers, and steel recyclers. Such a programme was recently tried very suc-
cessfully by Unocal Corporation in California, scrapping 8,376 pre- 1971 autos and removing
10.7 million pounds of air pollutants from the Los Angeles basin.66 The programme cost $700
per car or $5.9 million.
Measurements of carbon monoxide emissions from Ontario vehicles driving along the
Don Valley carried out last year by the University of Denver revealed that 10 percent of the au-
tomobiles surveyed produced close to 50 percent of the total emissions. Although high pollut-
ing cars fell into every age category, old autos tended to be worse offenders.
Analysis of the results of the Unlocal programme tend to confirm the University of
Denver tests, which have also been conducted in Los Angeles, Denver, and Chicago. The
vehicles scrapped, which averaged 5,500 miles per year, emitted 15 times more pollutants than
a comparable fleet of 1990 autos travelling annually an average of 15,000 miles. Ontario
should establish a similar demonstration project, to determine the cost effectiveness of
scrapping old cars as an emission reduction strategy.
shift TO lower carbon fuels. Both natural gas and ethanol offer significant ad-
vantages over gasoline and diesel as motor fuels, not only because their emissions of key pol-
lutants are lower, but for other reasons. They are also superior from the points of view of
health, safety, and Canada's energy security. Viewed strictly from a greenhouse gas point oi
view, their substitution for gasoline and diesel offers an important opportunity for Ontario to
48
reduce CO; emissions from transportation, as well as strategic opportunities to develop new
industries throughout the province.
The province has been active for some years encouraging natural gas, by exempting its
sale from provincial tax and investing funds in R & D. A particular focus of this effort has been
the development of a natural gas urban bus, which Ontario Bus Industries is now prepared to
commercialize.
With respect to natural gas, the province should do more, looking beyond just fleet ve-
hicles to passenger automobiles for applications. The province should adopt a goal of achieving
a 10 percent share of natural gas in new light duty vehicles by 2005, a policy framework in
which a variety of R&D and market incentives would need to be developed to achieve the goal.
High on its priority list should be an R &D programme comparable to its bus effort that seeks
to develop: (a) natural gas "monofuel" engines for passenger vehicles that optimize combustion
to the characteristics of gas, and (b) catalysts that are able to reduce fugitive methane
emissions. An important market that may be underestimated at present is the market for mini-
cars that are used for commuting and urban run about. Since such cars would be highly fuel
efficient, their range would be adequate given a single tank of natural gas. These efficient and
super clean urban cars could help reduce urban pollution, and people would be attracted to their
environmental friendliness. Such autos would be aimed at the second car market in urban
areas.
With respect to ethanol, the government should carefully review the options for gaso-
line additives to replace lead and seek a way to encourage ethanol blend, perhaps by allowing a
credit in the provincial sales tax for the use of renewable fuels, banning petroleum-based addi-
tives as a replacement for lead, or simply gradually mandating the use of ethanol, an approach
taken by legislation being considered by the U.S. Congress.67 For the long term, the govern-
ment should develop an aggressive programme to commercialize ethanol produced from
lignocellulose by 2000. The R&D component would focus on reducing the costs of
lignoceliulose conversion, and methods for mitigating negative environmental impacts of short-
rotation intensive cultivation of woody crops. In addition, the government should form
industry and financing partnerships to help Iogen move its technology to the large-scale
demonstration stage, by urging Ontario Hydro to fund a cogeneration demonstration plant that
would produce electricity and ethanol, such as presently proposed by Iogen.
INTENSIFY LAND USE IN GTA AND other urban areas. As noted earlier, there is
a good correlation between population/job density and energy consumption in transportation.
An analysis of GTA data suggests that reductions in transportation related CO; emissions per
capita might be possible by intensifying of land use not only in Metro, but in some surrounding
urban centres such as Hamilton, as well as in other urban areas around the province. (See ac-
companying graph.)
The transportation implications of land use decisions in the GTA have been studied and
debated extensively in the past year in an effort sponsored by the Provincial Office of the
Greater Toronto Area in the Ministry of Environment. The three concepts for growth in the
GTA that have emerged include:
• Spread — the status quo, representing the continuation of existing trends that include
substantial population growth in low density suburban regions;
• Nodal — residential and employment intensification occurring in a compact form around
existing communities;
• Central — substantial concentration of future growth in Metro.6*
49
The "spread" concept would lead to significant growth of radial trips from the regions into
Metro, as well as increases in trips among the suburban regions, resulting in a CO2 increase of
75 percent by 201 1. A less extensive freeway network is needed in the "nodal " concept, and a
modest extension of rapid transit is assumed, but C02 emissions rise 59 percent. In the
"central" concept, major extensions of rapid transit are assumed, and only freeway projects al-
ready announced are built; in this scenario COt rises 40 percent. Per capita CO; emissions fall
slighdy under the "nodal" concept (one percent), and more under the "central" concept (13 per-
cent).69
From an environmental perspective, the debate concerning the three concepts is largely
irrelevant, since emissions of all the major pollutants, including CO;, would increase signifi-
cantly under every scenario. In addition, large amounts of agricultural land, much of it prime
land, would be convened to urban use. The "central" concept is not really as central as it
claims, since 200,000 acres of prime farm land would be lost.
Population Density vs. Dally C02 Emissions for
GTA Planning Districts, 1986
80
p
e
70
r
s
60
0
n
50
s
/
40
h
e
30
c
t
20
a
r
10
e
X PD 2-Toronto
y
PD 4-Yor*
. . X PD 1 -Toronto
X V ^
PD 13-Scarborough
x x
y - PD 36-Mississauga
D 33-Vaughan X^
« x x
.* * x **•<
-lx->:x+x
PD 34-Catedon
V
\
+
+
4 5 6
Dally C02 (kg) per capita
With respect to the GTA, the province should rethink the questions and issues of inten-
sification from an environmental perspective. The goal of any long-term plan, in addition to
achieving beneficial economic and social changes, should be to reduce emissions of CO; and
other transportation related air pollutants, to improve air quality, and to minimize impacts or.
prime farm land surrounding the region.
In order to move in this direction, the province should abandon the present debate about
the GTA's future, go back to the drawing boards, and begin a new initiative that seeks to de-
velop an intensification strategy that would reduce dependence on automobiles, reduce trans-
portation energy consumption and related emissions, increase population and job densities in
5 0
communities that are already dense, preserve the rural and urban differences that occur
throughout the GTA, and significantly expand rapid rail transit.
As a first step, provincial officials should carefully examine policies in other jurisdic-
tions, such as Oregon's urban boundary zone regulations (see Chapter 2) and a newer initiative
in Dade County, Florida, for their potential relevance to Ontario. A freeze on all new highway
road construction projects, such as the 407, in the GTA, to allow for a new consultation pro-
cess to address the environmental aspects of land use and road construction would also be ap-
propriate. Planning and construction of roads should shift immediately to high occupancy ve-
hicle (HOV) and bicycle infrastructure.
The new public consultation process should not only address GTA issues, but other
major urban centres in Ontario, eventually leading to recommendations for new provincial
strategies for:
• intensifying land use;
• protecting prime farm land and preserving rural values:
preserving and/or restoring natural areas such as remaining wetlands, river valleys,
headwater areas, and other significant natural features;
shifting infrastructure investments from roads to rail and public transit;
redirecting road supply investments to high occupancy vehicle infrastructure, dedicated
commuter bus routes, and bicycle urban bicycle lanes;
• reducing energy in the transportation sector over the long-term.
INVEST IN RAIL TRANSIT, HOV, AND BICYCLE INFRASTRUCTURE. The foregoing
discussion of intensification leads to two recommendations addressing the future of the
province's transportation infrastructure, the need:
• to significantly expand rail transit in urban areas such as Metro and between important
economic centres, such as northern Ontario and southern Ontario, and:
• to strengthen incentives for people to car pool by supporting construction of compre-
hensive high occupancy vehicle systems and facilities in the GTA and other urban ar-
eas.
Urban rapid rail transport is typically more energy efficient than the automobile, and
probably is the only way to effectively attract people away from using their cars. Long-distance
rail is the least energy intensive way to ship goods, and inter-city passenger rails provides a
good alternative to the car for short trips. The province should consider significantly expanding
infrastructure investments in both urban and inter-city rail. In the GTA, for instance, the most
economical investment would be to use the existing rail corridors for local rapid rail, linking
new stations with municipal surface transit and infill residential and commercial developments.
The rail corridors are valuable, underutilized public assets waiting for development. Many ma-
jor attractions and hubs, such as Pearson Airport, the Metro Zoo, and Ontario Place would
benefit significantly if they were linked together into a regional rapid rail system.
When the average automobile is fully occupied, it also is an efficient mode of transport.
Declining occupancy rates plague most North American cities, however, including Ontario's
cities. To reverse this trend the province should invest significant effort and funds in the devel-
opment of high occupancy vehicle (HOV) infrastructure and programmes. Ontario's most suc-
cessful initiative, Ottawa's Transitway, a two lane route reserved for buses during rush hour
periods, is unfortunately an isolated example of innovative HOV planning. Ontario's cities
should follow the example of several American cities, such as San Diego and Seattle, and de-
velop comprehensive HOV systems, not just piecemeal lanes, that are pan of an overall urban
land use and transportation strategy.
51
Bicycles can provide an important alternative to both autos and public transit in urban
centres, and they do in many countries such as The Netherlands, where significant funds have
been invested in bicycle paths, parking facilities, and other amenities. Ontario governments
have yet to take them seriously, however. We suggest that the province undertake a major
public works initiative to develop such infrastructure in the GTA and other urban centres
around the province.
4.7 Economic and Social Implications
Data presented in Section 4.3, Table 4 (a) shows a 40 percent improvement in fuel effi-
ciency is cost effective and will pay back the car owner in three to five years in energy savings
at present gasoline prices. Achieving the target, however, would add about $1,000 to the aver-
age cost of a new car, which will make it more difficult for some people to own cars. The pro-
posed feebate program, though, will financially assist the purchase of new fuel efficient cars
and, combined with the programme to buy and scrap old cars, should help offset much of the
additional cost of buying a new car. Consumers will still have the same range of choice of
models. Achieving the target does not mean that cars will have to be "downsized"; it simply
means that manufacturers won't have much leeway to "upsize" power and performance.
How will a change in consumer behavior affect Ontario's automobile industries? Some
of North America's most fuel efficient cars are manufactured in Ontario, including the
Suzuki/GM Swift, Toyota Corolla, Honda Civic, and Ford Tempo, which together make up a
third of the province's total production. On the other hand, almost half of the cars built in the
province are Ford Crown Victoria, Mercury Grand Marquis, and Chevrolet Lumina, which are
not fuel efficient. Among the less fuel efficient models, however, only about three percent of
the total production was sold and registered in Ontario in 1990, while a much higher percentage
of the fuel efficient models were sold and registered here. While implementing a programme
like DRIVE-t- in Ontario will spur some market shifts, on balance it appears unlikely it would
adversely affect the province's auto industry.
In sum, almost all of the large cars build in Ontario are exported to the United States.
Therefore, the industry is actually a lot more vulnerable to changes in regulatory policy and
consumer demand there. Since more stringent CAFE standards seem likely to be enacted by the
U.S. Congress in the next few years — a bill mandating 40 mpg by 2000 was narrowly de-
feated in the Senate in the fall, 1990 — Ontario's auto industry should be positioning itself for a
new emphasis on fuel efficiency. The Province's commitment to fuel efficiency, and resulting
changes in consumer demand, would send a strong signal to the industry that it is time to pre-
pare for a future that is fast approaching.
The fuel substitution initiative that is likely to have the most economic and social impact
is ethanol, and the impacts are likely to be mostly' beneficial for Ontario. First, the province will
begin producing its own transportation fuel derived from local resources, thereby lessening de-
pendence on external sources of petroleum. Second, should the conversion of lignocellulose to
ethanol prove commercially viable by 2000 — the cost of conversion has dropped many fold in
the last ten years, reaching 23 cents/litre in leading laboratories — production of the fuel should
open up new economic opportunities.
A provincial initiative that potentially will have the most impact economically and so-
cially would be a deliberate effort to encourage significant intensification of urban areas From
an infrastructure investment and maintenance point of view, such an initiative is likely to prose
the least cost approach to meeting future transportation needs. Building and maintaining public
transit systems is less expensive over the long-term than building and maintaining roads.
52
ENDNOTES
55See discussion in Michael Walsh, "Motor Vehicles and Global Warming", Global Warming:
The Greenpeace Report (1990)
56Ibid.
57"New Cause of Concern on Global Warming". New York Times. February 12, 1991, p. B9.
58Philip Jessup, Carbon Emissions Reduction Options in Canadian Transportation, Discussion
Paper No. 1, Friends of the Earth, Ottawa (July, 1989)
wMarc Ledbetter and Marc Ross, Supply Curves of Conserved Energy for Automobiles,
Universitv of California, Lawrence Berkeley Laboratory, Berkelely, California (March,
1990)
^U.S. Senate. S. 279, A Bill To Amend the Motor Vehicle Information and Cost Savings Act,
Washington, D.C. (January 29, 1991)
61U.S. Department of Transportation, Effect of Car Size on Fatality and Injun Risk in Single-
Vehicle Crashes, HS 805-729, Washington, D.C. (August 1990)
62Peter Newman and Jeffrey Kenworthy, in Cities and Automobile Dependence: A Sourcebook
, Gower Technical, Sydney, Australia (1989)
"Lee R. Lynd, "Large-Scale Fuel Ethanol from Lignocellulose: Potential, Economics, and
Research Priorities", Applied Biochemistry and Biotechnology, Vol. 24/25, 1990, p. 717.
wTechtrol Ltd., Bio-Energy: A Major Industrial Opportunity, Montreal (1991)
"Deborah Gordon and Leo Levenson, "DRIVE+: A Proposal for California to Use Consumer
Fees and Rebates to Reduce New Motor Vehicle Emissions and Fuel Consumption",
Lawrence Berkeley Laboratory, Berkeley, California (July 1989)
66John Rafuse, "Data and Lessons from Unocal's South Coast Recycled Auto Project",
Testimony before the U.S. House of Representatives, Committee on Energy and Commerce.
Subcommittee on Energy and Power, October 1, 1990
67U.S. House of Representatives, The Ethanol Motor Fuel Act of 1987, introduced by
Congressman Richard Durbin and Congressman Edward Madigan
68Greater Toronto Coordinating Committee, Greater Toronto Area Urban Structure Concepts
Study: Background report No. I — Description of Urban Structure Concepts, IBI Group,
Toronto (June, 1990)
69Greater Toronto Coordinating Committee, Greater Toronto Area Urban Structure Concepts
Studv: Background report No. 3 — Transportation Systems, IBI Group, Toronto (June,
1990), Exhibit 33
53
CHAPTER 5— INDUSTRIAL SECTOR
"In terms of initial action, Imperial believes steps that make sense in then-
own right are most appropriate, such as energy efficiency improvements
that can achieve economic returns at least equivalent to the cost of capital.
This allows simultaneous progress as uncertainties are reduced in global
warming science and socio-economic impacts and as the negotiation of in-
ternational protocols proceed."
Imperial Oil Ltd., "Draft Discussion Paper on Global Warming
Response Options" (April 1991)
5.0 Introduction
The industrial sector is the largest consumer of energy in Ontario. In 1988, this sector
accounted for 1,318 PJ, about 35 percent of Ontario's total energy. The major industrial energy
users are: iron and steel, chemicals, pulp and paper, mining and cement. ° Together they ac-
counted for approximately 61 percent of total industrial energy in 1988.
Figure 5 (a): Ontario Industrial Energy Use, 1988
TJ energy
300 -r
Iron and Petroleum Chemicals Pulp and
steel paper
Mining Cement
Energy use in the industrial sector is unique in two ways. First, it is the only sector in
which coal is employed as a significant direct energy source. Second, the energy requirements
of industry include very high temperature, large scale, energy intensive processes and equip-
ment, such as blast furnaces and large motors. Other sectors tend to comprise many, small-
scale activities, such as heating buildings or operating motor vehicles.
Natural gas is the largest source of secondary energy in the industrial sector, providing
39 percent of the total. Industry is also the largest consumer of natural gas, comprising 45 per-
cent of total natural gas use in the province.
The heavy reliance on coal in the industrial sector — it accounts for 23 percent of sec-
ondary energy — is attributed to the iron and steel industry, which requires coal in order to pro-
duce coke. Indeed, 31 percent of all coal consumed in Ontario is used to make steel. The ce-
ment industry is the next largest industrial consumer of coal in Ontario.
5 4
Electricity comprises 20 percent of industrial secondary energy consumption. While
both the residential and commercial sectors are more electricity intensive, industry consumes 38
percent of Ontario's electricity, more than the other sectors. The share of electricity has been
increasing in industry due to the growth in new electricity-intensive technologies and the in-
crease in electronic and computer-based applications in industry. These structural, procedural
and process trends, if they continue, will strengthen demand for industrial electricity, particu-
larly if fossil fuel-based processes such as blast furnaces are replaced by electric arc furnaces in
the iron and steel industry.
Oil is the source of 11 percent of total secondary energy consumed by industry.
Substitution of natural gas for oil has reduced oil consumption in industry over the past two
decades. Wood waste and spent pulping liquor are used as an energy source by the pulp and
paper manufacturers and now account for over half of that industry's total energy needs.
This chapter provides an overview of energy trends, efficiency potential, and economi-
cally attractive CO2 reduction measures in industry. Given the wide diversity of sub-sectors
and industries in each sub-sector, only one industry is examined in depth, the iron and steel in-
dustry, as a case study in Chapter 6. It is by far the largest emitter of C02, accounting for 40
percent of the sector's total.
5.7 Profile of C02 Emissions
In 1988, Ontario's industries emitted 64 megatonnes (Mt) of C02. 39 percent of the
province's total. The following chart shows approximate direct CO: emissions generated by
each of the major industrial sub-sectors. After the iron and steel industry, the pulp and paper
industry is the second largest producer of CO2, accounting for 20 percent of the total for this
sector.
Figure 5 (b): C02 Emissions by Industry, 1988
Put> and pape
20%
Iron and steel
38%
Chemicals
8%
Cement 4%
Mining 5%
Industrial CO2 emissions from secondary energy declined between 1980 and 1988.
However, when emissions related to electricity generation are included, emissions remained
relatively constant over the period.71
55
The industries that contributed most to the reducuon in industrial CO; emissions from
secondary energy were the iron and steel and the petroleum refining industries. Since these in-
dustries did not introduce major new technologies during the 1980s, the primary cause for the
reduction appears to be a declining level of output due to reduced demand for the products
manufactured by these industries. Advances in operating efficiency and other cost-cutting mea-
sures introduced in the mid-1980s also contributed to lower energy consumption and reduced
CO; emissions.
The Ministry of Energy forecasts industrial CO2 emissions to be 49 percent higher in
2005, more than double the average forecast increase of 21 percent for all sectors combined.
Moreover, industry's share of CO emissions is forecast to increase seven percent bv the year
2005.
5.2 Profile of Energy Intensity Trends
Energy intensity in the industrial sector in Ontario is high in comparison to almost all
other industrial nations, despite the energy efficiency strides that have been made over the past
decade. Two major factors contribute to Ontario's high energy intensity: the large proportion of
energy intensive primary industries and the availability of relatively inexpensive energy, which
discourages efficiency.
Nonetheless, industrial energy intensity (excluding petrochemicals and non-energy
uses) fell 34 percent between 1979 and 1985, measured in terms of energy used per dollar out-
put.72 Two factors contributed to this reduction in energy intensity: direct efforts to reduce en-
ergy costs by improving the efficiency of industrial processes; and, more importantly, struc-
tural changes in Ontario's economy. Rising energy prices in the early 1980s were a major cata-
lyst for Ontario industries to improve energy efficiency. Efforts to reduce energy costs in in-
dustry included the replacement of inefficient equipment, use of new production processes, and
fuel switching.
The cement, chemical, and pulp and paper sub-sectors made significant gains, each
with a decrease in energy intensity of over 20 percent from 1979 to 1985. The iron and steel
industry saw a decrease of six percent over the same period. Pulp and paper remains the most
energy intensive industrial activity in Ontario, consuming nearly 30 MJ per dollar of output (in
1984). The iron and steel industry consumes approximately 12 MJ, which is lower than the
total industrial average for Ontario.
The effects of structural changes in Ontario's economy are complex, but according to
an EMR study, they made a greater contribution — 54 percent — to improved industrial energy
efficiency than direct efficiency efforts.73 One fundamental change has been the increased
growth in the less energy intensive industrial sub-sectors relative to the energy intensive indus-
trial sub-sectors, such as those referred to in this report. The increase in GDP attributed to light
industry has grown substantially over the past decade. This increase is due to changes in con-
sumer demand and a decline in output of certain energy intensive products. Specific sectors,
sub-sectors and even processes within sub-sectors need to be compared directly in order to
gain accurate insight into the relative efficiency improvements of Ontario's industries. Such
analysis, however, is beyond the scope of this report.
Over the long-term, it is safe to say that industrial energy intensity will continue to de-
crease in Ontario over the next 20 years, as less energy intensive indusmes and products grow
faster relative to heavy industry, and as new production processes and efficient equipment re-
place aging ones. For example, in the iron and steel industry the trend is towards production of
56
specialized, high quality steel products, often made in "mini-mills" that require less energy to
produce a product unit than the larger blast furnace dominated mills.
5.3 Opportunities for C02 Reductions
Approximately two-thirds of energy consumed by industry is used to create process
heat, and natural gas is the major fuel for industrial process heat. The remaining third com-
prises modve power, electrolytic processes, space hearing, lighting, and feedstock uses.
A detailed breakdown of these industrial end-uses is difficult to make, since data are not
available. A simplified approach attributing the generic end-use categories to fuel type, based
on Ontario Hydro analysis, is employed in the industrial sector analysis and is described in
Appendix E.
Since a large share of industrial energy is used to create process heat, significant oppor-
tunities for improved efficiency and CO: reductions exist in the recovery and reuse of steam in
production processes. Use of cogeneration to produce heat and power simultaneously and the
recycling of waste heat with heat recovery systems are two strategies currently being used by
industry on a limited scale. Considerable scope exists for their wider application.
The other area where potential efficiency gains are significant are electricity end uses.
The four major end uses are: motive power, electrolysis, process heat, and lighting.
Approximately 75 percent of total industrial electricity is used for motive power, which in-
cludes motors to operate pumps, fans, compressors, conveyors, and mills for grinding,
crushing, rolling, etc.
Opportunities for CO2 reduction in the industrial sector are described in two ways.
First, opportunities which can be applied to generic activities across all industries are pre-
sented, and, second, opportunities in specific industries are outlined. Specific opportunities in
efficiency, fuel switching and renewable energy are also examined, but in less detail than for
the sectors in the previous sections of this report. Information sources, unfortunately, are
scarce and tend to be focused on narrow technical opportunities.
GENERIC OPPORTUNITIES. A recent study of energy related greenhouse gas emis-
sions in Canada estimates that a technical potential exists for a 24 percent reduction in CO;
emissions in the industrial sector between 1988 and 2005. 74 According to the study, the most
cost-effective measures for reducing emissions are those that improve energy efficiency, as op-
posed to fuel substitution. Since the Inter-Fuel Substitution Demand (IFSD) model was used.
the projected increase in electricity prices eliminates the cost-effectiveness of fuel switching and
specifically, the potential for widespread introduction of cogeneration.
Efficiency measures. According to a recent Ministry of Energy study on electricity con-
servation in Ontario, energy savings of 17 percent between 1989 and 2000 are possible
through electricity conservation measures in the industrial sector.75 The major areas of savings
identified in the study are motive power (variable speed drives), waste heat recovery, lighting,
electrolysis, process controls, refrigeration and motors.
House keeping measures also offer substantial opportunity for improving energy con-
servation. Ministry of Energy reports, independent reports, and industry experts have all
pointed to the importance of incremental improvements in general house keeping, which,
although difficult to quantify, appear to offer a minimum savings of 10 percent across all forms
of energy consumed.
57
Motive Power. A recent EMR study presents a detailed analysis and recommendations
regarding the potential for energy conservation in industrial drive power in Canada.76 The
drive-power savings arrived at in the study are Canada-wide, but, according to the study "the
overwhelming majority of installed industrial motor capacity" across Canada is of the same
type (AC polyphase induction). Therefore, it is assumed that the results present a fair represen-
tation for Ontario. A summary of drive power savings identified for three industrial sub-sectors
is presented in Table 5 (a).
TABLE 5 (a): Summary of Drive Power
Savings
Industry Savings
GWh
Savings
PJ
Reduction
Pulp and paper 19,541
Chemicals 3,81 1
Iron and steel 2,089
70.3
13.7
7.5
21.3%
18.0%
14.9%
TOTAL 25,441 91.5 20%
GWh=milhon kilowart-hours: PJ=thousand trillion pules
Source: Industrial Dnve-power Case Study. EMR. 1990
The study recommends replacement of aging equipment with high efficiency motors
and pumps, and improved matching of motive speed and torque to actual instantaneous loads.
The study estimates that motive power efficiency measures adopted by pulp and paper, iron
and steel and chemical industries could result in a 20 percent energy savings by 2020. This es-
timate is likely to be extremely conservative, since the federal Inter-Fuel Substitution and
Demand model (IFSD) used to forecast the results projects a real decline in electricity prices
over the next 30 years, a forecast that seems quite improbable.
Heat Recovery. A number of opportunities are available for recovering waste heat and
reusing it to heat other industrial processes. Heat pumps, heat exchangers and vapour recom-
pressors are three relatively cost-effective methods of recovering waste heat.
Pinch Technology (a computerized process for determining optimum heat recovery and
heat pumping according to fuel price) is a recent innovation which can produce fuel savings
between 25 and 40 percent. Pinch technology is an analytical technique used to idendfy specific
capital investments in more energy efficient process hardware as well as optimising industrial
processes. It is best applied to new plant design. However, it has been used successfully in
retrofit situations providing payback in the nine month to three year range. Optimizing heat re-
covery in industry can result in an estimated reduction in energy consumption of 15 to 20 per-
cent of current levels and improve efficiency in new plants by 40 percent. A conservative esti-
mate of savings in heat energy is 25 percent.
Energy efficient lighting. Lighting comprises approximately eight percent of industrial
electricity use. Industrial lighting typically has a higher utilization than commercial lighting,
although industrial lighting tends to be more efficient than lighting in other sectors. Savings of
60-65 percent for the industrial sector appear to be economically attractive.
Cogeneration. The simultaneous production of electricity and heat from a single source
of energy is called cogeneration. The source of energy is generally natural gas. Cogeneration
has four major benefits for Ontario:
• Substantial cost savings can be realized by industries participaung in cogeneration;
• Ontario Hydro can benefit from the avoided cost of building new power plants;
58
• Effective electrical generation efficiency can be doubled, as compared to coal-fired gen-
eranon;
• Major reductions in CO; emissions on the order of two-to-four fold are possible.
Cogeneration has an advantage over conventional thermal generating plants because of
its ability to exploit waste heat created in the production of electricity, thereby improving
overall cycle efficiency. In addition, electrical transmission losses, approximately 7 -to- 10 per-
cent, are eliminated since the cogeneration facilities are located at the point where electricity is
required. Other advantages of cogeneration include the substantial savings in land use due to
the distributed nature of the power production. This is particularly important when considering
large nuclear plants or dams situated long distances from end-users, requiring massive land
right-of-ways for the transmission lines.
Cogeneration is typically employed by industrial facilities using large steam boilers and
steam turbines, or gas turbines with waste heat recovery boilers. Interest in cogeneration has
also resulted in the development of smaller cogeneration systems that can be used by light in-
dustry or in commercial sector applications. Specific applications of cogeneration in the steel
industry are discussed further in the case study for that industry.
A report to the Ministry of Energy has estimated the economic potential of cogeneration
in the industrial sector to be 1,942 megawatts (MW), or 42 PJ of electricity, assuming the units
operate at 80 percent capacity.77 The report considers the implementation potential to be some-
what less (1,347 MW). However, changes in fuel and electricity prices since the study was a
conducted have improved the economic outlook in favour of more cogeneration. The authors
now estimate that the economic potential identified may now be a reasonable implementation
potential. With real increases in electricity rates by 2005— and higher buy-back rates offered by
Ontario Hydro— it is estimated that an even larger cogeneration potential could be realized by
2005.
Renewable Energy. The use of renewable energy (excluding hydro) is relatively limited
in the industrial sector. The increased use of solar energy, biomass, and to a lesser extent.
wind power, can provide an environmentally advantageous source of power for industry. Due
to the uninterruptable supply and high energy intensities required by large industry, however, it
is unlikely that alternative energy sources will play a major role in this sector in the near term.
On the other hand, numerous opportunities for passive solar buildings and active solar water
heating are present in light industry and should be exploited. These applications resemble those
in the commercial sector.
One potential source of significant C02 reductions using renewable energy in industry
does exist, however, in the pulp and paper industry. The primary source for energy in this
sector is wood and wood waste, which accounted for 10 Mt of C02 emissions in 1988. If the
forests that provide wood feedstock to the industry were managed on a sustainable basis, so
that the biomass energy derived from them is all renewed by natural regeneration or silvicul-
ture then such emissions could be reduced 100 percent when measured on a net carbon basis.
(The same reasoning underlies the proposed shift to ethanol as a transportation fuel, outlined in
Chapter 4.)
5.4 Measures to Reduce C02 Emissions
The most important measures for reducing C02 emissions in the major energy consum-
ing industry sub-sectors are described in this secnon. Industry specific policies for the iron and
steel industry, are discussed in detail in Chapter 6. Estimated savings potential for the major
industrial sub-sectors, based on a survey of recent studies, are as follows.
59
PULP AND PAPER industry. The pulp and paper industry is the most energy inten-
sive industry in Ontario, consuming approximately 30 MJ per $1984 of output. It is also the
second largest consumer of energy and second largest emitter of C02 in Ontario. The pulp and
paper industry is, however, unique in that 48 percent of the energy used comes from wood
waste or spent pulping liquor. This form of energy comes from recycled waste that would
otherwise not be used. The CO2 emission rate associated with burning wood waste, however,
is 100 Kt/MJ of energy, higher than other energy sources.
There is a continuing debate among policymakers whether CO2 emissions produced
from burning wood for energy should be included in provincial and national emissions inven-
tories. The Coalition believes that wood should be included, with the proviso that forestry
management practices that seek to ensure replacement of the harvested biomass be allowed to
offset such emissions. Hence, the most significant C02 reductions role for the pulp and paper
lies in the area of changing forest management practices. A more serious commitment to selec-
tive harvesting practices (as opposed to clear-cuts) and to silviculture to ensure that all biomass
that is harvested is replaced by new growth could enable the pulp and paper industry to offset
all of the wood-related CO2 it emits into the atmosphere by ensuring adequate new biomass
growth.
For the purposes of this analysis, it is assumed that some efficiencies can be gained in
the motive power component of the pulp and paper industry, some opportunities for cogenera-
tion exist, and that a 10 percent housekeeping reduction can be achieved in the use of burning
wood waste.
In addition, the analysis presented in Appendix E estimates that net C02 emissions can
be reduced or offset by 8 Mt (68 percent) by 2005, assuming that the pulp and paper industry
by 2005 succeeds in replacing all harvested biomass with new biomass. It should be noted as a
caveat, however, that while the Ministry of Energy includes wood-related CO; emissions in its
1988 inventory, it does not credit the industry with any offsets in 1988, even though some sil-
viculture is practiced by both industry and the province. As a result, our estimate of an 8 Mt re-
duction is somewhat overstated, since the base from which the estimate is made is too high be-
cause it does not credit present silviculrural practices.
cement industry. In the cement industry, energy costs comprise 40 percent of total
production costs. Therefore, programmes to improve energy efficiency should be welcomed by
the cement industry, particularly in light of projected electricity price increases. Waste-derived
fuel is being explored by at least one major cement producer (St. Lawrence) and will meet 20
percent of heat requirements, contingent upon environmental assessment results.
According to an Ontario Hydro study on the cement industry, a 20 percent improve-
ment in energy efficiency is possible in the cement industry by 2015/8 This estimate is conser-
vative with respect to C02 reductions, since the emphasis of the study is on energy efficiency,
not C02 reduction, therefore numerous opportunities for encouraging less carbon intensive fu-
els were not addressed. The most significant opportunity for C02 reductions is the substitution
of natural gas or waste-derived fuel for coal in pyroprocessing. Unfortunately the high cost of
natural gas would be prohibitive, which leaves waste derived fuel as an option. Since substan-
tial amounts of heat and power are required to make cement, it is a potential candidate for steam
turbine cogeneration. Opportunities for shared inter-industry energy schemes should be en-
couraged.
The Ministry of Energy projects a 109 percent increase in non -electricity CO: emissions
for the cement industry between 1988 and 2005. This forecast anticipates tremendous energy
demand growth which appears at odds with recent historic experience. According to the anal> -
60
sis in Appendix E, CO: emissions from the cement industry are expected to be 4 percent higher
in 2005.
chemicals industry. A comprehensive review of energy conservation potential in
the chemicals industry in Canada has been completed for Energy, Mines and Resources.79
According to the study a total energy savings across all fuels and industrial processes in the
chemical industry could result in a savings of 37 percent by 2020. Since the focus of the report
was energy savings and not specifically CO; reductions, it is anticipated that greater reductions
in CO; emissions would be possible with emphasis placed on the use of less carbon intensive
energies in combination with the energy efficiency measures described in the study. Moreover,
the EMR study uses IFSD supply price forecasts which project a steady decrease in electricity
prices between 1988 and 2020, reducing the potential for switching to natural gas as well as
reducing cogeneration opportunities and estimates for CO; reduction.
The analysis in Appendix E identifies a 15 percent reduction in CO; emissions from the
chemicals industry by 2005. This reduction is consistent with the estimates for specific effi-
ciency measures identified in the study referred to above. Improved drive power efficiencies,
heat recovery, improved electrolytic processes and overall efficiency improvements achieved
with the aid of PINCH technology contribute to the savings in the chemicals industry.
OTHER INDUSTRIES. CO; emissions can be reduced seven percent by 2005 in the
"other" industries not specifically addressed in this report. This is a reduction of 1.6 Mt and
can be attributed to the specific measures summarized in Appendix E.
In summary, a net reduction in CO; of 15 percent (9.2 Mt) appears economically attrac-
tive in the industrial sector assuming the measures outlined above are implemented. Most of the
reduction occurs in the pulp and paper industry as the result of the adoption of renewable
forestry management practices. For the rest of industry dependent on conventional fossil fuels,
therefore, the case presented here is essentially a scenario to stabilize CO; emissions in this
sector at 1988 levels by 2005. The following table summarizes the results, which are based on
the analysis in Appendix E.
TABLE 5 (b): Summary of C02 Savings
INDUSTRY
Chemical
Iron and Steel
Cement
Pulp and Paper
Other
TOTAL
5.5 Barriers to Achieving Measures
The primary barrier to achievement of efficiency measures in industry is the short pay-
back period that is compelled by the way financial investments are typically assessed by most
companies, which is compounded by the low price of energy which industry pays. Given the
high rate of return that financial managers typically seek, one-to-two year payback, for in-
stance, is a typical requirement for energy efficiency expenditures. Except for energy intensive
industries where the factor cost of energy may affect international competitiveness, therefore,
energy use does not usually concern most industries. Indeed, of all the sectors, the industrial
61
co2
reduction
Change from
1988-2005
1988
(Mt)
(%)
0.6
13%
(0.6)
(3%)
(0.1)
(4%;
7.9
67%
1.4
6%
9.3
15%
sector in Canada has experienced the least reduction in energy intensity over the past two
decades, and more of the reduction in the sector is attributable to structural change than to effi-
ciency improvements.
5.6 What Ontario Can Do
In order to encourage a reduction in industrial CO; emissions by 2005, Ontario's gov-
ernment should consider five broad options, some of which are already being pursued, but
which could be intensified. They include:
• Encouragement of energy efficiency within all industries, through a variety of strate-
gies, such as: providing information and incentives for general industrial efficiency im-
provements (eg. high efficiency motors, variable drive motors, lighting etc); encourag-
ing the development and use of more efficient industrial processes (eg. new steel mak-
ing technologies);
• Creation of regulatory mechanisms, such as a cap on emissions from the largest
sources of CO2, and/or market mechanisms, such as an emissions trading programme,
energy taxes, and other approaches to achieve stabilisation of CO; emissions at 1988
levels by 2005 in this sector;
Requirement of higher Ontario Hydro buy-back rates to encourage the full development
of cogeneration potential in this sector and the substitution of natural gas for coal and
oil;
Policies to facilitate the restructuring of the industrial sector, placing emphasis on those
industries or components of industry which are less energy intensive;
• Greater tax and other incentives for research, development, and commercialization of
energy efficiency technology and alternative energy sources in industry.
The following are a number of specific suggestions to implement these broad options.
ENERGY EFFICIENCY ESCOS. Industrial energy efficiency can and should be im-
proved beyond the levels permitted only by short payback periods. Aggressive measures are
required to identify areas for improvement and to provide a mechanism to affect change.
One approach would be for the government, in collaboration with labour unions in
specific industries that have good labour-management relations and with Ontario Hydro, to en-
courage the formation of special purpose energy service companies (ESCOs) operated by the
unions. The purpose of the labour ESCOs would be to pursue maximum efficiency measures
in a particular industry, the result being a revenue flow from the company to the ESCOs based
on the energy savings achieved.
Several key ESCOs could be created using the expertise of labour organisations in each
industry. Ministry officials. Hydro industrial efficiency experts, and specialized consultants.
This joint approach, particularly with the participation of labour, will facilitate the introduction
of unique measures at the plant level, while permitting all stakeholders with an opportunity to
"buy in" to the process.
The ESCO would fund capital improvements to plants through a combination of labour
union pension funds and Hydro avoided cost funds targeted for conservation. It is recom-
mended that a demonstration ESCO be created for a small industry where energy savings can
be demonstrated and industrial relations would presently permit such cooperation.
ESCOs would focus on all of the generic industrial opportunities and house keeping
improvements, as well as certain industry specific opportunities appropriate to the expertise of
the ESCO.
62
regulatory controls and market approaches. Controlling CO; emissions
through regulation will form an important part of a carbon reduction strategy for Ontario. Two
options are described below. The preferred option is a cap on CO; emissions from the majority
of large point sources of CO; in the province, coupled with an emissions trading programme to
allow industries to find the least cost control option.
One option for reducing industrial CO; is to use the existing regulatory framework for
control of air pollution. The framework for most air pollutants is the Environmental Protection
Act and Regulation 308, the General Air Pollution Regulation. The AfJ requires a certificate of
approval for all sources of air contaminants and the Regulation specifies the standards for in-
dividual contaminants that all sources in Ontario must meet. These standards are expressed as
concentrations at the "point of impingement", the highest concentration at a receptor downwind
of a point of emission.
CO; is not now regulated through this mechanism, and Regulation 308 is not consid-
ered to be an effective option for reducing CO;. This is due to the nature and limitations of the
point of impingement standards, particularly as they relate to the specific characteristics of CO;
. First, the concern with CO; is not with the effect on a particular receptor, but with the gradual
increase in total CO; levels in the atmosphere. Point of impingement (POI) standards do not
provide this measurement. Second, POI standards accommodate dilution and dispersion of
stack gases. These standards may improve local air quality for individual contaminants, but do
not affect total loadings of C02. Third, POI standards do not establish a cap on total loadings
of contaminants into the environment. In order to achieve reductions in CO; emissions, total
loadings must be specified.
Regulation 308, however, is now undergoing change, and POI may not be a mainstay
of the programme in the future. There may be new capability to provide a regulatory
mechanism for a cap and, if so, this framework should perhaps be revisited for the purpose of
controlling industrial CO; emissions.
A second option using existing regulatory authority could be to establish a cap on
emissions of CO; from the largest industrial emitters and allocate allowable emissions among
them. This quota type system could be based on the approach taken to control acid gas emis-
sions in Ontario. In the Countdown Acid Rain programme, the Ministry of the Environment fo-
cused on the four largest emitters of sulphur dioxide (Inco, Falconbridge, Algoma and Ontario
Hydro). Using individual regulations for each emitter, total annual loadings were established
for 1994 and a timetable of interim reductions was set out. The companies were required to re-
search and develop the means for meeting the 1994 limits. All four have successfully devel-
oped their own programmes for complying with the regulations well within the schedule.
Ontario's acid gas control programme is a useful model because there are many
parallels between CO; emissions and acid gas emissions in the industrial sector. There are an
identifiable number of larger industrial emitters of CO;, particularly the iron and steel, pulp and
paper, chemical, mining, and cement sectors. Targeting only the major contributors to the
problem would facilitate administration of such a regulation. In addition, controlling CO; will
require the adoption of alternative fuels or process changes that are within the knowledge of
each sector. This approach puts the onus on those with the most understanding of the process
to find solutions. Most importantly, controlling the effects of greenhouse gases requires setting
a ceiling on the total allowable loadings to the atmosphere, which could be more easily done
using this approach than the framework in Regulation 308.
A further option with the quota system, allocating emissions among a limited number of
polluters, could be to allow emissions trading among those industries. Emissions trading is not
63
now practiced in Canada, but has been used in the United States since 1976. In principle,
emissions trading allows companies to reduce their emissions below their quota and to either
use these reductions to increase emissions from another process or facility or to trade the re-
ductions with other companies. This system gives companies a great deal of flexibility in
meeting the regulations.
There is concern with emissions trading that, while overall air quality will not be ad-
versely affected, local air quality can deteriorate significantly as the result of a company buying
another's quota. The concern with C02 is with total loadings, however, so emissions trading
may be an effective way of injecting flexibility into the system. There are, however, a number
of administrative impediments to an effective emissions trading scheme that would have to be
addressed. For example, some view trading of emissions quotas as a "license to pollute", in the
sense that the quota is static and companies can pollute up that limit. (The same is true for regu-
lated emissions levels.) This could be addressed for C02 by gradually reducing the emissions
ceiling over time. Other concerns are the quality of the data among industries, the difficulty of
enforcement for regulators, and the difficulty of calculating each company's credits.
A third option could be to regulate CO2 through the new regime for controlling air pol-
lution in Ontario, known as the "Clean Air Program" or CAP. Reform was first proposed in
1983, and the Ministry of the Environment has been developing the new programme since
then. A draft regulation, CAP would change air standards from point of impingement to point
of emission, eliminating dispersion as a tool of air quality protection, and would set standards
on the basis of the toxicity of the individual contaminant. Three or four levels of concern will
be established for classifying air contaminants. For example, the most persistent toxic
substances would require the most stringent type of control, known as "lowest achievable
emission rate."
CAP as now expressed in the draft regulation does not contemplate regulation of CO;,
but instead focuses on contaminants that are toxic in the sense of their direct impact on human
or environmental health. C02 could be included as a contaminant, but the present system for
classifying contaminates into different levels of concern would have to be modified. The effect
of including C02 here would be to require every source in Ontario to comply with the new
regulation, which may prove administratively difficult.
Perhaps a more effective way of addressing C02 within the reforms to the existing
regulatory regime would be to focus on a limited number of priority pollutants, including C02,
and regulate the largest emitters of these pollutants so that all emissions would be minimized.
This "shopping basket" approach would ensure that steps taken to minimize one pollutant will
not result in an increase in another. However, while this approach has been suggested to the
Ministry of the Environment though the public consultation on CAP it is not now pan of the
draft regulation. We urge its reconsideration.
FUEL switching strategies. Fuel switching and cogeneration strategies could re-
duce emissions in the industrial sector. Industrial sector cogeneration includes both the small
commercial size units, for light industry, as well as very large (>50MW) units. The larger units
are unique since they are designed to produce more electricity than is required by the "host"
plant, so that the excess can be sold back to Hydro. Buy-back rates from Hydro are critical to
the economic success of large cogeneration sites. Therefore, buy-back (and actual purchase)
rates must be increased to reflect the full external cost of producing elecmcity, thereby stimulat-
ing industrial cogeneration.
In some cases, even more direct collaboration between Ontario Hydro and/or municipal
utilities to structure and finance cogeneration projects that increase elecmcity supply while
making a contribution to the modernization of existing industrial capacity may be appropriate.
64
IMPROVED INDUSTRIAL PROCESSES. The province, in collaboration with Ontario
Hvdro should make industrial modernization grants that encourage industries to accelerate the
adoption of new industrial processes that offer important energy savings. Other policies such
as industrial competitiveness incentives should be explored, including accelerating the amorti-
zation of capital intensive equipment used to improve energy efficiency.
Existing programmes which provide gTants for industrial demonstration projects and
new technologies need to be coordinated across all relevant ministries to provide a more
focused industrial strategy for accomplishing energy efficiency and environmental goals. (See
Chapter 7.) . .
In the case of at least one companv regulated under the province s acid gas control pro-
gram Inco government industrial modernization funds were provided that permitted installa-
tion of new processes that not onlv reduced sulphur from the ore, but turned the facility into a
showcase of new technologv that the company is now selling worldwide. There is no reason a
similar approach couldn't be used in the province's proposed regulatory initiative to cap CO;
emissions from major industries.
RESEARCH, DEVELOPMENT, AND commercialization. Canadian energy use and
efficiency is direct'lv affected by both the level and focus of research. Canadian government
RD&D budgets for'energy svstems analvsis in 1989 were US$5.3 million, a 75 percent de-
crease from 1983 and only one percent of the U.S. budget for R & D.80 Moreover, the majonty
of Canadian public sector research spending funds mega-energy projects and nuclear power.
The research funding emphasis must be directed away from new. expensive and envi-
ronmentally hazardous energy supplies, toward conservation, and efficiency.
Statistics Canada estimates that only one percent of all annual capital investment in
Canadian industrv is spent to reduce energy costs. Results of a survey analyzing capital
spending patterns 'between 1985 and 1987 show 53 percent spent to increase capacity, 40 per-
cent for equipment replacement and modernization, one percent for pollution control, one per-
cent for improvement in working conditions and four percent for other reasons.
The goal for improving energy efficiency is therefore to ensure that the 40 percent
spending on modernization and 53 percent on expansion includes energy efficiency as one of
the considerations in these components of spending, since it is unlikely that the one percent di-
rect spending would have a significant impact on overall energy efficiency.
The Ministry of Energy currently provides several programmes covering development
(EnerSearch Program) and demonstration (Industrial Process Equipment Program) of new
technologies as well as improving efficiency on-site (Industrial Energy Services Program) and
encouraging cogeneration (Cogeneration Encouragement Program).
However, the lack of funds allocated for the commercialization of proven technology is
a common complaint regarding government incentive programmes. The establishment of a
special fund that aims to commercialize new energy efficiency technologies may provide the
boost required bv small firms to bnng their technology to the market place. A programme or
this nature should provide small seed capital grants as well as commercialization and marketing
expertise.
industrial RESTRUCTURING. A comprehensive industrial strategy is required to en-
sure a coordinated and long-term approach to job creation and economic stability, in light of the
structural changes taking place in Ontario's industries. New and less energy intensive indus-
tries must be provided with opportunities to start-up and grow. Ontario s traditional resource-
based economy must be provided with more Ontano-based secondary manufacturing to help
65
balance the energy intensiveness of the industrial sector, and more importantly, create jobs in
the secondary and tertiary sectors. Specific industry sub-sectors need to be identified where
Ontario has a comparative advantage and the potential for international leadership. One can ar-
gue that Ontario is losing its comparative advantage in the resource intensive primary indus-
tries. Our true comparative advantage lies in our well-educated labour force and socially and
environmentally progressive society. Industries producing environmental and energy efficiency
products should be provided with incentives such as, seed capital, investment tax credits,
prime rate loans and other conventional incentives.
5.7 Economic and Social Implications
If nothing is done to reduce costs and improve the productivity of Ontario's industries,
the economic and social implications will be serious. It is critical for Ontario to maintain, or in
many instances regain, its international competitiveness, in order to reverse the trend of jobs
being lost to other countries. The prospect of a permanent loss of labour-intensive manufactur-
ing in Ontario is high. According to some economists there will never be a full economic re-
covery, following the current recession, in all sectors as long as Ontario's competitive position
remains so poor. Adopting aggressive measures to improve energy efficiency will provide one
means for cost reduction in Ontario's industries, as well as creating an opportunity to once
again provide technological leadership in growing fields (environment and energy) and an op-
portunity for people to move into better jobs.
The recommended measures depend on the flexibility of specific industries affected and
the ability of Ontario industries to act upon the opportunities created through energy efficiency
measures.
ENDNOTES
70Ontario Ministry of Energy (November 1990)
71Ontario Ministry of Energy, Ontario's Energy Related Carbon Dioxide Emissions, Toronto
(1990)
72Ontario Ministrv of Energy, Industry Energy Trends, Toronto (1986)
73EMR, Energy Demand in Canada,' 1973-1987: A Retrospective Analysis, Ottawa (March
1989)
74DPA Group, Inc, Study on the Reduction of Energy Related Greenhouse Gas Emissions,
Toronto (1989)
75Ontario Ministry of Energy, Electricity Conservation and Acid Rain in Ontario, Toronto
(1989)
76EMR, Remaining Energy Conservation Potential in Canada: Industrial Drive-power Case
Study, Ottawa (November 1990)
77 Acres International, Cogeneration Potential in Ontario, Toronto (February 1987)
78Ontario Hydro, An IN DEPTH Model of the Ontario Cement Industry, Toronto (1990)
79EMR, Industrial Sector Case Study— Chemical Industry, Ottawa (1990)
^CIPEC, Canadian Industry Program for Energy Conservation (October 1990)
66
CHAPTER 6— THE IRON AND STEEL INDUSTRY
"In the high-value enterprise, profits derive not from scale and volume but
from continuous discovery of new linkages between solutions and
needs....Steelmaking is becoming a service business, for example. When a
new alloy is molded to a specific weight and tolerance, services account for
a significant pan of the value of the resulting product. Steel service centers
help customers choose the steels and alloys they need, and then inspect, slit,
coat, store, and deliver the materials."
Robert B. Reich, from The Work of Nations (1991)
6.0 Introduction
The iron and steel industry in Ontario employs over 60,000 people. This number is
declining, as are the net incomes and outputs of Ontario's major integrated steel manufacturers.
The major integrated steel makers (those which typically own coal and iron mines, produce
coke, and manufacture steel) include only two major companies in Ontario, Dofasco and
Stelco. There are numerous smaller steel companies in Ontario which play an increasingly im-
portant role in steel production. Costeel (Lasco) is one notable mini-mill with a reputation for
quality steel and advanced technology. The top producers and employers in Ontario are listed in
Table 7 (a), following.
TABLE 7 (a): Top Steel Producers In Ontario (1989)
Name
Revenue
Em
ployees
($mllllon)
3.908
22,700
2,749
16,147
2,086
11,500
483
2,532
1. Dofasco
2. Stelco
3. Ivaco
4. Canron
TOTAL 9.226 52,879
Source: Financial Post 500, 1990.
The steel industry in Ontario has reached a critical point. Iron and steel demand is low,
competition from cheaper producers is increasing, technological changes are happening
rapidly, permitting more efficient production, and environmental and cost concerns are forcing
the steel industry to adopt more efficient measures.
At the end of 1988, U.S. steel makers supplied 2.5 percent of Canadian demand. By
the end of 1990, their market share had increased to 17 percent. Major economic restructuring
of this nature has severe social and economic implications for Ontario. The economic downturn
which began in 1989 and is expected to continue for another year, has eroded demand for
structural steel, rails and other industrial products. The future does not look very encouraging
for the Ontario steel industry, which is operating at less than 50 percent capacity. Dofasco's
Algoma subsidiary is barely solvent and job losses may be as high as 25 percent of the total
work force in three to five years.61 In ten years, Stelco's work force has been reduced 81 per-
cent, from 26,000 employees in 1981 to 14,348 employees in 1990. According to steel ana-
lysts, this figure could drop to as few as 9,000 by 1991.
67
The auto industry and petroleum industry comprise the major markets for Ontario's
steel, in the form of flat-rolled and tubular steel. Lower car sales, or more importantly the
lower ratio of domestic to foreign sales, combined with low oil prices (and therefore a lack of
exploration) have contributed to major losses at Dofasco, Stelco and Algoma last year. Work
stoppages at Stelco and Algoma added to the losses and contributed to the increase in U.S. im-
ports.
Historically, Ontario's steel industry has been very profitable and highly regarded in-
ternationally. The combination of readily available and inexpensive raw materials (iron ore and
coal) with captive and somewhat protected local markets (auto and oil exploration) provided the
Ontario steel makers with a significant comparative advantage over many other nations.
Consequently, there was little incentive for the Canadian steel industry to pursue the aggressive
cost-cutting and energy cutting programmes that other countries, notably Britain and Germany,
have had to undertake.
Consequently, in a matter of a few years, Canada has lost its comparative advantage to
countries who have invested in major cost-reducing programmemes. Cost reductions are
therefore essential if the Canadian steel industry is to survive.
6.1 Rationale for Profiling the Steel Industry
Ideally, each of the major industrial sub-sectors should be examined in detail in order to
identify specific opportunities where energy efficiency can be introduced and CO: emissions
reduced. Such a research effort, however, was beyond the scope of this project. Nonetheless,
the iron and steel industry in Ontario has been selected for more detailed examination, for sev-
eral reasons.
• it is the largest industrial producer of CO; in Ontario;
it is the largest industrial consumer of energy in Ontario;
• there is Canadian ownership, therefore, Canadian accountability;
there are significant opportunities for efficiency improvements;
major research activities on energy efficient technologies are currently in progress
world wide;
• major implications for the Canadian steel industry' may result from the U.S. Clean Air
Act coke oven regulations;
• Ontario Hydro's INDEPTH Model of the Ontario Iron and Steel Industry provides a
comprehensive analysis of current steel making processes and new technologies.
Finally and perhaps most importantly, the iron and steel industry in Ontario is in the
midst of troubled times, providing an excellent opportunity to examine measures for improving
it's efficiency and competitiveness that could be compatible with an effort to reduce CO: emis-
sions.
6.2 Profile of Energy Use
Ontario's iron and steel industry is the largest single energy consuming industry in the
province. Over 253 PJ of secondary energy was consumed by the iron and steel industry in
Ontario in 1988. Coke and coke oven gas make up approximately two-thirds of the total energy
requirements. Electricity accounts for nine percent of the total energy consumed in producing
iron and steel. This makes the iron and steel industry the third largest electricity consumer in
the province after pulp and paper and chemicals.
Figure 4 provides energy used by the steel industry for each energy source as a per-
centage of total industrial energy use for the given sources. Over 80 percent of the coal used by
68
industry is used to make steel. Less than 20 percent of the three remaining major sources of in-
dustrial energy; natural gas, petroleum and electricity, are used in the steel industry.
Coal is the major energy source in the steel industry and is an essential component of
integrated steel making. Coal is burned in coke ovens, to produce coke, which is essentially
pure carbon. Coke is needed to fuel the blast furnaces as well as to "reduce" the iron.
Reduction is the chemical reaction between the carbon in coke and the oxygen in the molten
iron, which removes the oxygen, by producing CO; and carbon monoxide.
100
Percent
■o ■
•o 4
40 ■■
to -
FIGURE 4
Coal Natural Oaa Pvlrolaum Elaolrtolty
Energy Source
STEEL INDUSTRY ENERGY USE AS A
PERCENT OF TOTAL INDUSTRY
Electricity is used by both the integrated mills and the mini mills. In the mini mills, un-
like integrated mills, electricity is the primary source of energy and electricity intensity in mini
mills is nearly double that of the integrated mills. Mini mills melt scrap metal in electric arc fur-
naces (EAF) and therefore consume far less energy per tonne of steel.
Although EAF steel making is preferable to coke-based steel, the massive electricity
consumption of an EAF carries with it the problems of low primary energy efficiency, trans-
mission losses, and potential CO; emissions from coal-fired electricity generation. As the tech-
nology in mini mills improves, EAF will continue to encroach on the markets of the integrated
steel makers.
Mini mills have the added environmental advantage in the role they play as recyclers of
scrap metal. At Lasco, Canada's largest mini mill, approximately 900,000 tonnes of scrap
metal are recycled annually.
Figure 5 illustrates the increasing role EAF made steel is playing in Canadian steel pro-
duction. In 1989, 31 percent of Canada's steel was made in electric arc furnaces, up from 13
percent in 1970.
69
6.3 Profile of C02 Emissions
The iron and steel industry had direct CO; emissions of 18.4 Mt in 1988. Accounting
for indirect CO; emissions from electricity use, approximately 15 percent of all CO; emitted in
Ontario can be attributed to making iron and steel.
As described above, CO; is produced in the iron making process in several ways.
However, four-fifths of the CO; is produced by burning coke in the blast furnace. Nearly nine
percent of all CO; emissions in Ontario can therefore be attributed to one process in one indus-
try— coke for steel making.
14
Net Tonnes (000)
12
10
8
6
4
2
1970
1975
1980
1986
1989
Integrated ^— EAF
FIGURE 5 INTEGRATED MILL VS. EAF STEEL PRODUCTION
Other direct and indirect CO; emissions from steel making, although small in compari-
son to coke-related emissions, still represent a significant overall source. Electricity is used for
EAFs, electric ladle preheating and motive power. Natural gas and oil are not widely used in
steel making, although a new process (Midrex, described below) uses natural gas and electric-
ity instead of coal.
6.4 Opportunities for C02 Reduction
Substantial research is underway worldwide to reduce the energy intensity, and more
specifically the need for coke, in the steel making process. There are two fundamental methods
to pursue in achieving this goal. First, is through meticulous "housekeeping" measures.
Second is the introduction of new steel making technologies, described below
Housekeeping measures include; regular maintenance and cleaning of equipment, par-
ticularly coke ovens, recycling flue gas and other waste heat, furnace insulation and sealing,
micro-processor controlled reheat furnaces, fuel substitution, recuperative burners, byproduct
recovery, increased use of scrap metal and general efficiency consciousness.
70
Many of the generic industry policy recommendations described above can be applied
to the steel industry, particularly regarding motive power efficiency and heat recovery. It is im-
portant to note that Canadian steel makers have invested substantially in research and new tech-
nologies to reduce costs, limit emissions and improve energy efficiency. These achievements
are discussed following the discussion on new technologies.
It is the opinion of leading steel industry research experts that the incremental, relatively
low cost improvements have far more potential in the near term for reducing energy consump-
tion and CO; emissions than the introduction of major capital intensive technologies. This
would appear to be particularly applicable in Ontario, where additional major capital expendi-
tures would be inconceivable given the financial position of Ontario's steel industry.
Nonetheless, significant attention is being given to new steel making technologies and the re-
search being undertaken by the steel industry to develop cokeless steel making.
NEW TECHNOLOGIES. The alternative technologies being explored fall under three
basic categories; direct reduction, direct smelting, and direct steel making. Direct reduction iron
(DR1) is a process where iron ore is reduced without melting the iron and also eliminates the
need for coke ovens and blast furnaces.
A number of commercial DRI plants are operating throughout the world, including
Quebec's Sidbec-Dosco plant. Sidbec uses the Midrex process, considered to be the best DRI
process. Midrex uses a large amount of natural gas to reduce iron pellets in a shaft furnace.
Coal-based direct reduction processes are also in use, but less successfully.
Direct smelting processes eliminate the need for coke ovens and blast furnaces. The
Corex (or KR) process appears to be one of the more promising direct smelting technologies
being tested.
An ISCOR steel plant in South Africa is the first full-scale steel facility demonstrating
Corex technology. The Corex process (as with other direct smelting processes) eliminates the
need for coke ovens and blast furnaces. Coal is used directly with iron pellets to melt and re-
duce the iron. Early operating performance at the ISCOR plant (following a brief shutdown) is
encouraging, which may provide the impetus required for other steel-makers to build commer-
cial Corex plants.82 Weirton Steel in West Virginia came close to building a Corex plant in
1987, but the plans were shelved due to more pressing capital commitments. Plasmamelt and
ELRED are two other direct smelting processes. The former uses plasma for melting the steel,
therefore requiring a large amount of electricity and the ELRED process uses a DC arc current
and a combined-cycle cogeneration plant. Although considerable research energy is being ex-
pended on all three processes, the steel industry does not appear to be embracing the technol-
ogy-
Direct steel making is the most advanced steel making technology being explored and
involves burning coal instead of coke, similar to Corex. The American Iron and Steel Institute
(AISI) is leading a $30 million study in direct steel making. Assuming the development of
commercial processes, it is predicted that direct steel making could cut U.S. coke demand by
98 to 99 percent by the year 2030. 83 Japanese steel makers are also working on a direct steel
making project budgeted at $90 million. According to the publication Iron Age, reduced coke
demand attributed to direct steel making would not likely exceed 7.8 percent by the year 2000.
Others are less optimistic.
In addition to the new technologies being developed for efficient front-end steel making
processes are the advances in hot steel output processes. Traditionally, steel was first made into
ingots, which had to be cooled, then reheated, then rolled flat, trimmed and sometimes reheated
a second time. This process is very inefficient. Continuous casting and thin slab casting are
71
two advances in steel finishing which eliminate cooling-reheating steps as well as reduce waste
steel.
Continuous casting comprised 77 percent of Canadian steel production in 1989. In
1970 less than 12 percent of Canadian steel was continuous cast. Thin slab casting is a more
recent advance in steel processing which will most likely follow the success rate of continuous
casting. Nucor Inc., the tenth largest steel maker in the U.S., is the first company to make
commercial use of thin slab casting. Although numerous difficulties were encountered in
bringing the process on stream, analysts predict that large steel makers will adopt the process
since it offers substantial savings in energy, time, and resources.
CANADIAN RESEARCH AND DEVELOPMENT. Both Dofasco and Stelco have excellent
reputations internationally for research and innovation. However, the focus of research has
been primarily on quality control and steel finishing, as opposed to cost reduction and energy
efficiency. This follows logically from the relative position of security and profitability these
companies had throughout the 1970s and mid-1980s.
Six of Canada's major steel producers (including Stelco and Dofasco) are partners in a
research endeavour called Project Bessemer Inc. The partners are committed to spending S20
million over seven years to do research on thin-slab continuous casting.
THERMAL cogeneration AND offgas RECOVERY. The use of cogenerated ther-
mal energy can result in considerable energy and cost savings ( 10 to 20 percent) for the metals
industry.8'4 High temperature exhaust gases from combined cycle turbine generators can be
used to preheat scrap, ladles, furnaces, fuel, and additives.
CwU Consumption (OOO N«t Tonn««)
FIGURE 6 COAL CONSUMPTION TREND COMPARISON
Furnace offgas recovery is a similar concept whereby the high temperature gases re-
leased from steel furnaces (either EAF or traditional blast furnaces) are used to preheat scrap
before entering the furnace. The Consteel (connnuous steel) method for EAFs makes use of en-
ergy that would otherwise be wasted, as well as offsetting the amount of electricity required to
72
melt the scrap metal. In addition to energy and cost savings, offgas recovery to preheat scrap
Provides for better working conditions by reducing noise levels fumes and dust emissions.
Furthermore, the svstem is reported to have a return on investment of approximately one
ycar« One Ontario company (EMPCO Ltd. of Oshawa) markets a Consteel scrap preheating
system in Canada.
REDUCED DEMAND. Figure 6 illustrates the actual 15 year trend of coal consumption in
the steel industrv in Canada, projected ahead to 2005, versus the Ministry of Energy forecast
or Ontario coal consumption in 2005. The third line (Best Guess), is the authors best estimate
based on discussions with steel industry representatives, the general economic outlook and
conditions in the Ontario steel industry. The lines serve to demonstrate that the Ministry of
Energy projection for coke related CO; emissions in 2005 appears to be high, particularly in
lieht of the fact that coal consumption has been decreasing in the steel industry for the past 15
years Moreover, economic predictions for Ontario's steel industry suggest that a turnaround
will take several vears and full recovery may never occur. If this is the case, C02 reductions in
the steel industrv 'mav reach 20 percent by 2005 based on reduced steel output, product specul-
ation and increasing proportion of EAF steel. The "best guess" scenario estimates that coal
c?nsum^on m the s"l industry will increase 20 percent from 1989 levels. Stee tonnage out-
put will increase at a slower rate than dollar value output as the industry shifts to higher qualm,
value-added specialty steel products. Future steel demand will be met increasingly by the mini
mills, which do not cause any increase in coal consumption.
6.5 Barriers to the Introduction of Efficiency Improvements
Numerous reasons are frequently cited for Canadian industry's reluctance to innovate.
Among the reasons are: inability to fund major capital expenditures, unwillingness to wait for
long payback periods, lack of confidence in unproven technologies, difficulty moving away
from the status quo, and the general risk adverse nature of Canadians. None of these reasons
appear to be the case in the iron and steel. As described above, the Ontario steel producers have
invested heavily in modernization and innovation. They have had to in order to remain com-
petitive.
There do not appear to have been any specific "barriers" to introducing energy efficient
technologies. A more practical explanation is that management priorities have been focused on
different aspects of technological innovation. The priority for the Ontario steel industry has
been product quality, and therefore a focus on steel processing technologies such as the
Bessemer Project, rather than technologies to replace coke and blast furnaces. Moreover coke
ovens in Canada are considered to be more efficient and less polluting than many of the U.b.
coke ovens.
Improvements in efficiency and productivity in traditional steel making also act as a
barner to adopting new technologies. According to the President of USX Corp... one ot the
latest steel makers in the U.S., technologies to replace blast furnaces often lag behind blast
furnace improvements.
In order to assist the introduction of energy efficient technologies, every effort must be
made to ensure that the cost savings component is a significant part of the new technology The
steel industrv is highly competitive and virtually all innovation is tied strictly to improving
cSpcSe through either lower costs or higher quality products. Energy ^""t tech,
nologies that provide marginal cost benefits and risk disrupting operations will not be accepted
by the industry.
The major barrier to producing more steel from electric arc furnaces is the present sup-
ply of recyclable steel. The mini mills are also constrained by environmental regulanons pre-
73
venting them from disposing of "automobile fluff (the non-steel remainders of a shredded car)
on-site. Increased understanding of the positive role of mini mills and flexibility in disposal
methods would assist mini mills. Fear of an impending energy crisis is also a concern for the
mini mills due to their high electricity requirements. Other barriers include an unstable supply
(and unstable price) for scrap metal, and the lower quality of steel produced from scrap, mak-
ing the steel unsuitable for many high finish applications, such as the auto industry.
6.6 Review of U.S. Clean Air Act Provisions for Coke Ovens
Some of the most stringent legislation regarding coke oven emissions is contained in
the U.S. Clean Air Act, which became law in November, 1990. K Coke ovens are given strong
emphasis in the legislation and have unique status regarding certain regulations. It should be
noted that the major concern regarding coke oven emissions in the U.S. is benzene (a carcino-
gen) and that CO2 is not classified as a toxin under the Clean Air Act.
Two sets of standards are included in the Act, either of which can be selected by the
coke producer. Under the first option, existing coke ovens must comply with the Maximum
Achievable Control Technology (MACT) emissions standards by the end of 1995, and with
residual risk standards by January 1, 2003.
The MACT standards for coke ovens must be at least as stringent as specified limits,
such as no more than 8 percent of oven doors leaking. In addition, certain work practice re-
quirements must be met in 1993.
Under the second option, coke ovens have until 2020 to meet residual risk standards.
To qualify for this option, coke ovens must comply with the specified MACT limits in
November 1993, and with the lowest emission rate achievable by a rebuilt or replacement coke
oven. Furthermore, they must meet an even stricter standard by 2020 if EPA finds that control
technology has advanced. Coke ovens under option two can be reconstructed and still have
until 2020 to meet the requirements.
The U.S. Department of Energy and Environmental Protection Agency are to conduct a
six year study to assess coke oven emission control technologies and assist in the development
of control technologies. The agencies can provide up to 50 percent of the cost of projects to de-
velop, install and operate coke production emission control technologies. The AffJ authorizes $5
million annually for fiscal years 1992 through 1997.
6.7 An Integrated Approach to Best Available Technology
In order to make steel as energy efficiently and cost effectively as currently possible,
steel makers must take advantage of all of the best available technologies. It appears that the
Ontario steel industry is a long way away from replacing coke ovens and blast furnaces.
Therefore, in order to achieve the maximum savings possible at least-cost, an integrated com-
bination of best available energy efficiency and fuel switching technologies is required.
For example, an ideal scenario could include a mini mill using a high efficiency electric
arc furnace, offgas heat recovery to reheat the scrap metal used to make the steel, maximum
practical levels of insulation, continuous thin slab casting, variable drive motors (where re-
quired), high maintenance standards, a baseload displacement gas cogenerator used for basic
plant electricity needs and space and water heating, high efficiency lighting, and continued re-
search, development, and innovation.
Integrated approaches are required among industries, as well as within industries. The
Lasco steel plant has a neighbouring paper company and cement company. Without knowing
74
the details, it appears that these three plants may be able to take advantage of their different en-
ergy requirements in a coordinated approach to energy planning. A natural gas cogeneration
unit could provide the electricity for the EAF steel plant and the heat required by the paper
plant, while excesses of both could be used by the cement plant. Perhaps the cement plant
could also make use of Lasco's "auto fluff in an energy from waste plant. If industries were
provided with incentives to locate adjacent to integrated steel mills or other large industries
(specialized business park), excess waste heat could be provided to a district heating system or
directly to the plants. Identifying opportunities of this nature would be a useful role for the
Ministry of Energy. Significant energy savings may be possible by exploiting these kinds of
situations, however, quantifying the potential is very difficult.
6.8 Policies and Measures for Ontario's Steel Industry
Achieving a 20 percent reduction in CO: emissions in Ontario's iron and steel industry
will require cooperation among industry, government, and labour. Moreover, a comprehensive
industrial strategy is required for Ontario to coordinate economic, environmental and energy-
related concerns in the steel industry.
There are many energy programmes currently available to industry (cited above) which
provide valuable assistance in identifying energy efficiency opportunities and reducing energy
costs for industry. In order to achieve a CO; reduction of 20 percent by 2005, a much more
proactive and aggressive approach to energy savings is required.
The policy recommendations put forward in this document are intended to complement
and augment existing programmes, hence the need for a comprehensive strategy and
coordination among the Ministries of Energy and Environment, Ontario Hydro, labour and
industry.
Iron and steel industry policies can be categorized in a similar fashion to the industry
policies described above. Essentially, there are three basic measures to reducing CO; emissions
in the iron and steel industry; improving energy efficiency, adopting new technologies and
capitalizing on industrial restructuring.
ENERGY EFFICIENCY. General housekeeping improvements across all components of
the industry, particularly maintenance standards for coke ovens and blast furnaces, should
provide measurable reductions in CO; emissions.
• Placing minimum industrial efficiency standards in the Energy Efficiency Act for
generic industry equipment (drives, motors, fans, lighting, refrigeration etc.)
Bringing in current best practices for housekeeping will result in an estimated im-
provement in energy efficiency of 10 percent. Specific measures include: maintenance
standards, insulation, efficient lighting, recycling, heat recovery, etc.)
Maintenance standards and guidelines for regular maintenance and repair of coke ovens
and blast furnaces may result in a CO; reduction of up to 10 percent.
• Switching to off-peak electricity from either peak electricity or fossil fuels would im-
prove efficiency and reduce emissions.
The creation of a steel industry Energy Services Company, with joint participation of
Hydro, the Ministry of Energy, the United Steel Workers and the steel companies,
could identify the housekeeping opportunities and evaluate the energy savings potential
in steel plants.
Improving the energy efficiency and CO; emissions of current steel making processes
is perhaps the best method for reducing CO; emissions in integrated steel making.
75
The most significant and readily available mechanism for reducing CO; emissions is
substituting coal for coke in the blast furnace. Coal injection (as it is known) combined
with oxygen injection can reduce the coke used by up to 30 percent. Therefore a CO;
reduction of 5 percent is conceivable through coal injection.
Ontario hydro funding a portion of the capital cost of new energy efficient devices, cal-
culated according to Hydro's avoidance of cost for supplying increased demand.
Energy efficiency awareness programmes. Effective communication of the potential for
energy efficiency in industry is critical to the successful achievement the Ministry's
goals. A simple sustained education programme for industry should be established. The
programme could take the form of current Ministry initiatives such as advertising in
industrial journals or providing information to be posted in industrial facilities. This can
be a low cost means of increasing penetration of efficiency measures.
NEW STEEL MAKING TECHNOLOGIES. It is unlikely that any of the new steel making
technologies will be adopted by any steel makers in Canada in the near term, due to the massive
capital costs involved and given the substantial sunk costs in current technologies. A strategy
for the long term success of Ontario's steel industry should be pursued by the province. One
component of such a strategy must be investment in research, development and demonstration
of leading edge direct steel making technologies.
• Opportunities for investment in new steel making technology with Ontario Hydro acting
as a partner along with private sector capital. Perhaps through the establishment of a
venture capital fund.
Increased funding of joint industrial - scientific research and development.
STRUCTURAL CHANGES IN THE STEEL INDUSTRY. The percentage of steel made
from electric arc furnaces increased 143 percent from 1970 to 1988 and comprises approxi-
mately 30 percent of Canada's total steel production (approximately 17 percent of Ontario's).
EAF steel production is expected to comprise 25 percent of Ontario's total steel production by
the end of the 1990s. The production of EAF steel is limited to the demand for the types of
products EAF steel manufacturers make. Finite amounts of scrap metal and the lower quality of
EAF steel further limit the total production of EAF steel.
Since EAF steel making requires large amounts of electricity, it contributes to CO;
emissions, particularly if incremental electricity generation is fossil fuel-based. However, the
trend toward increasing the percentage of EAF-based steel is important for reducing CO;, since
coke-based CO; emissions are many times higher per tonne of integrated steel. Steel from scrap
is a laudable environmental objective since it encourages recycling.
Incentives are required to facilitate the proportion of steel produced from scrap, particu-
larly in mini mills employing electric arc furnaces. Incentives to maximize the recycling of
scrap metal should be developed, such as refundable deposits on car purchases. Metropolitan
Toronto has announced that effective July 1, 1991, no scrap metal will be permitted in its dis-
posal facilities, and the Ministry of the Environment is contemplating provincial bans on recy-
clable materials at all waste disposal sites in Ontario.
6.9 Savings Summary
In order to reduce CO; 20 percent of 1988 levels by 2005 the total CO; for the steel in-
dustry would have to be reduced to 202 PJ (or 16027 Kt CO; ) in 2005, a nearly 50 percent re-
duction of forecasted 2005 levels. One of the principal components of CO; reduction is revised
energy consumption forecasts (Table 3) based on the following assumptions.
76
MEASURE % IMPROVEMENT
General housekeeping 10% of all energy
Coal injection 5% of coal-based C02
Mouve power 20% improvement in motive power
Heat recovery 25% improvement in all non-coal heat
Cogenerauon* 35% savings in utility electricity
Lighting savings 65% improvement in lighting
• Cogenerauon is addressed in the electricity section and not included in the industrial analysis.
The scenario for reducing CO; emissions in the steel industry results in a net increase in
CO; emissions of three percent in 2005, according to the projections used in Tables la through
lg in Appendix D. Although far from meeting the objective of a 20 percent reduction, the re-
sults demonstrate a significant difference in point of view from the Ministry's projected 56 per-
cent increase in CO; in 2005. The major factors contributing to the savings include the lower
growth rate in coal consumption and more aggressive efficiency measures.
6.10 Economic and Social Implications
In many of Ontario's energy intensive industries, significant cost cutting will be re-
quired to maintain international competitiveness in the face of free trade. Since energy costs are
a major factor in these industries, investments in energy efficiency and cogeneration technolo-
gies should lower factor costs and improve the prospects for these industries over the long-
term. In one industry, the pulp and paper industry, the implications of implementing sustain-
able harvesting and silvicultural practices to reduce net CO; emissions from the use of wood
waste for energy needs more careful examination, however. This particular industry in under-
going significant change due to the shift to paper recycling in the U.S. (and Canada) and other
competitive pressures, and it is not known how sustainable forestry practices would affect the
industry's bottom-line.
ENDNOTES
^Survival of Steel, Hamilton Spectator (April 6, 1991 )
S2George McManus, Corex Comes Onstream, Iron Age (March 1990)
8?George Hess. Iron-makers Clean Up Operations. Iron Age (August 1990)
S4Ronald Carson, Thermal Cogeneration for the Metals Industry, Iron and Steel Engineer
(September 1990)
85George Hess, Scrap Preheating Fuels Energy Savings, Iron Age (December 1990)
^Environmental and Energy Study Institute, EESC Summary of Laws: 1990 Clean Air Act
Amendments, Washington, D.C. (1991)
77
CHAPTER 7— A GLOBAL WARMING INDUSTRIAL STRATEGY
"The conflict between environmental protection and economic competitive-
ness is a false dichotomy based on a narrow view of the sources of pros-
perity and a static view of competition. Strict environmental regulations do
not inevitably hinder competitive advantage against foreign rivals; indeed,
they often enhance it. Tough standards trigger innovation and upgrading."
Michael Porter, from The Competitive Advantage of Nations (1990)
7.0 Introduction
A major effort over the next 15 years to reduce the energy intensity of the province's
economy and to reduce CO; emissions will create important new opportunities for technologi-
cal and economic advancement. The implementation of the initiatives put forward in this report
for each of the sectors could well generate a wide array of new economic opportunities for
Ontario, ranging from the production of efficient residential appliances or the components for
new energy efficient commercial lighting fixtures to tine development of leading edge alternative
energy technologies accompanied by related manufacturing.
Each of these potential opportunities will have to be assessed independently to deter-
mine its economic viability and to determine what support, if any, the province should give to
capitalize on the opportunity. The diverse nature of the R&D, manufacturing and distribution
activities that could be associated with a global warming strategy will make it difficult for the
province to implement a single initiative to ensure such activities are based in Ontario.
Furthermore, many of the issues related to Ontario's competitive position with respect to these
activities are in fact just a microcosm of the larger issues of technological capability and com-
petitive manufacturing capabilities that go well beyond the scope of this project.
This case study examines one area of advanced technology — natural gas cogenera-
tion — that is likely to create important opportunities for the Ontario economy, should the
province deem an important role for parallel generation in reducing future CO; emissions. In
particular, the opportunities for smaller institutional and commercial installations are explored,
not only because they could be developed in the relatively near term if buy-back rates are
higher, but because they have generally been overlooked by Ontario Hydro's Non-Utility
Generation Plan, which foresees a maximum of only 85 MW of potential over the next 25
years.87 A transportation application is also explored.
Two technologies — diesel engine cogeneration (adapted for natural gas) and fuel
cells — are explored to demonstrate the kinds of economic benefits that could result from a
commitment by the province to the development and application of a particular technology
which would contribute to the reduction of CO; emissions. They are not necessarily the tech-
nologies that the government might choose to pursue. The initiatives proposed to support the
commercialization and market application of these two technologies, however, would apply to
other technologies as well, as well as assist the government in its pursuit of environmental and
energy related goals.
7.1 Diesel Cogenerators and Fuel Cells
Diesel/natural gas cogeneration and fuel cells in the 100-500 kW capacity range were
selected for a number of reasons. The primary ones are: significant technical potential that ex-
ists for cogeneration in Ontario's residential and commercial sectors, a total of 5,400 MW ac-
cording to a recent study, and the significant contribution they would make towards reducing
78
CO; emissions — if their technical potential can be partly achieved — by eventually displacing
central coal fired power. **
Diesel/natural gas cogenerators for building installations could represent a broadly
based economic opportunity, for several reasons.
• They potentially have wide application in both the residential and commercial sectors;
They are commercially available and have been proven in many applications in other
countries;
• They are already accepted by industry, and some of their component pans can presently
be manufactured in Ontario; final assembly can occur in Ontario as well;
• They enjoy efficiencies in the 70-80 percent range;
At least one Ontario company. Atlas Polar, is already gearing up production of a 250
kW system, and Ontario Hydro has expressed interest.
While the potential economic and environmental benefits from natural gas fuel cells are
more long-term, there are several reasons why they should receive the attention of utility plan-
ners and policymakers, despite the high cost of the first generation of commercial systems.
They have significant commercial potential in the future because they are modular, low
polluting, and quiet in operation and thus can be scaled to any size and sited almost
anywhere, including urban centres;
They have efficiencies in the 80-to-90 percent range, and unlike most combustion tur-
bines and diesel engines, they maintain their efficiency over varying loads;
• The potential for reduction in manufacturing costs is substantial, once economies of
scale can be reached;
Commercial production has already begun in Connecticut of one system;
The thermal/electrical ratio is more evenly balanced than in combustion technologies,
allowing for higher capacity utilization;
Current investment requirements for testing and commercialization could create an op-
portunity for Ontario to get in on the ground floor with this technology, and Japanese,
American, and European consortia have formed to exploit fuel cell development and are
looking for partners;
• A Canadian company in British Columbia, Ballard, has already developed the leading
fuel cell contender for transportation applications.
The Province should be taking steps to take advantage of the economic opportunities
that are likely to arise in the next one-to-three years from the application of these technologies.
Encouraging and/or participating in investments in the development and commercialization of
technologies could contribute to longer term environmental objectives, as well as significant
competitive advantages in economic terms.
7.2 The Role of the Entrepreneurial Company
Although the focus of this case study is on natural gas technologies, smaller en-
trepreneurial companies have been selected — Atlas Polar and Ballard — rather than the utilities,
primarily because small businesses in recent years have been the engine of Ontario's economic
and job growth. Natural gas utilities provide the conduit for the distribution of natural gas, and
their primary function is to link customers to their gas distribution networks rather than to sell
them the gas that flows through the pipes.
(While theoretically there is no incentive for a gas utility to "sell" gas, since their rev-
enues are generated through the hook-up and furnace and water heater financing, in reality.
however, vertical ownership in the industry, most notably British Gas' stake in both
79
Consumers Gas (the utility) and Bow Valley Resources (the gas producer) precludes impartial-
ity to sales. This situation is important to note when considering efficiency and conservation
incentives.)
While the utilities themselves are clearly involved in new product development, and in
some cases, in the financing of smaller technology firms — British Gas committed to establish a
venture capital fund for such investments as pan of its purchase of Consumers Gas — much of
the new commercial activity in this field is likely to come from smaller entrepreneurial compa-
nies. As in most industrialized companies, these smaller, growth-oriented firms are playing an
increasingly important role in the development and commercialization of new technology-based
products and services in Canada. However, many Canadian technology firms have been
tripped up by their inability to market effectively or their lack of management skills, with the
net result that many such companies have failed to realize the potential they were thought to
have.
As society's awareness around environmental issues continues to grow, and govern-
ments respond with progressive environmental initiatives, large new markets will be created for
a wide variety of goods and services related to the environment. Government policy must be
mindful of the need to support Canadian and Ontario-based firms in their efforts to capture
these markets.
The research for this phase of the project has reinforced the perception that smaller en-
trepreneurial firms are likely to be actively involved in the development and application of tech-
nologies intended to help protect our environment. The two leading firms in Canada in the
fields of natural gas cogeneration for smaller installations and natural gas fuel cells are Atlas
Polar and Ballard Technologies.
7.3 Atlas Polar
As has been made clear in previous sections of this report, there is significant potential
for cogeneration in Ontario. The issues limiting its use are economic and political rather than
technical at this point.
The opportunities for cogeneration in Ontario can be divided into two categories. The
first includes smaller scale installations (up to 2 MW), which are guided by the fundamental
principles of cogeneration efficiency (requiring roughly equal outputs of heat and power) and
are designed primarily for load displacement. The second type of cogeneration opportunity in-
volves larger installations which are driven primarily by the economics of independent power
production. An investment in cogeneration for private power production must be able to gen-
erate significant revenues from the sale of excess electricity, regardless of the heat require-
ments. Since it is more difficult to sell heat than power, the trend in large scale cogenerators is
therefore towards electricity plants with minor (perhaps 10 percent of total) heat production.
One of the main differences between the small proprietary cogeneration plants and the
larger third party operated industrial plants is the relationship between the cost and the price of
the electricity and the heat. In the case of the smaller proprietary plant, the energy consumer is
receiving heat and power at "cost". The economic incentive is therefore to produce heat and
power at a lower cost than the cost for which it can be purchased.
In a third party cogeneration plant, the operator of the plant is selling the heat and the
power to the host customer as well as to other customers. Therefore, the incentive is to produce
power that can be sold at a lower price than that charged by other sources. This implies that the
heat and power must be produced at a lower cost in a third party operation if it is to generate an
acceptable profit margin.
80
The principle impediment to the increased use of cogeneration in Ontario, particularly
for larger third parrv plants, is the low price that Ontario Hydro currently pays to buy back ex-
cess efectricitv For the large cogeneraoon facilities, the pnee that Ontario Hydro is willing to
pav is an important factor, since this revenue is one of the major reasons for getting into private
power production in the first place. The buy-back rate for large independent producers is
somewhat lower than Ontario Hydros full cost of avoiding investment in a new nuclear plant.
For smaller cogeneration facilities, the issue is more one of capital cost than buy-back
rates since these producers are typically more interested in meeting their own needs than in
selling electricity Most prospective candidates for a small cogeneration facility would be look-
ing for a payback period of less than five years before considering a capital investment of this
nature.
Adas Polar is an Ontario-based company already active in smaller cogeneration installa-
tions The power engine division of Atlas Polar has been investing in the design and develop-
ment (with financial support from Ontario Hydro and the Ontario government) of a 25U kw
cogeneration system which is now installed in nine of the 10 sites in Ontario where cogenera-
tion units of this size can be used for load displacement purposes. The company maintains that
the current economics allow for a payback period of four-to-five years on a system of this size,
which is short enough to start to make cogeneration an attractive economic option. Once that
has been established, the market for these smaller cogeneration units should start to grow
rapidlv and the company estimates a market potential of about 500 MW for the 250 kW sys-
tem.
This load displacement market encompasses mostly institutional and commercial facili-
ties A constraining factor at this point is the amount of thermal (heat) energy these facilities re-
quire In many instances, the only thermal requirement is for heating the building, and minor
requirements for water heating. In the absence of a need for a roughly equivalent amount of
heat the economics of cogeneration evaporate quickly. However, it appears that gas absorption
chilling is now considered to be a viable option for meeting the air conditioning requirements of
a building, which means the thermal output from the cogeneration unit can be used year round,
strengthening the economics of the unit.
Atlas Polar believes that there will be considerable market potential for their load dis-
placement cogeneration units within the next decade, up to 500 MW for its 250 kW system^
The economics of the unit are now favourable enough for much of that market potential to be
achieved, according to the company.89 The issue for Adas Polar now is how to capitalize on
that potential.
7.4 Ballard Technologies
Fuel cells can be divided into five types, based on the nature of the underlying technol-
ogy phosphoric acid (PA), molten carbonate (MC), solid oxide (SO), alkaline (A), and solid
polymer (SP). Each of these technologies has its strengths and weaknesses, which in turn cre-
ate different opportunities for commercial application.
The PA fuel cell technology is perhaps the best established and has been the focus of
considerable research in Japan and in the United States. In June of 1990, Umtec ^Technologies
Corporation and Toshiba announced that a subsidiary of their jointly .own^;lefm">°"1^™J
CeU Corporation would start commercial production of packaged, stationary PA fuel cell power
plants ofup to 1000 kW capacities for on-site electricity and heat energy semces. The cost of
tihese fuel cells is currendy about $2500/kW but is expected to fall to the $1000-$ 1500 range.
81
Osaka Gas Co. of Japan, is also formally committed to the development and use of the PA fuel
cell to enhance their efficiency and control the impact of power production on the environment.
Asea Brown Bovari, M-C Power and the Institute of Gas Technology have announced
that they will jointly develop and market MC fuel cells in the United States for a broad range of
power generation markets. These MC plants will range in size from about 500 kW for com-
mercial and light industry applications to hundreds of megawatts for central power stations.
Canada has developed some leadership in the solid polymer fuel cell technology
through Vancouver- based Ballard Technologies. The SP fuel cell technology has several dis-
tinctive features which could lead to two very large commercial applications in the future:
• It runs at 80° C, the lowest temperature of all of the fuel cells, and can be started up al-
most instantaneously, which gives it potential in the automobile and bus markets; and
• its power density is much greater than that of other fuel cells, which means the fuel cell
is much smaller, and could therefore have significant applications at the low end of the
cogeneration market.
Commercialization of the solid polymer fuel cell is still some years off, but Ballard has
attracted the interest and resources of a number of international investors, including British
Gas, which is a positive indicator of its potential. It recently received a $1 million grant from
the federal government to facilitate development and demonstration of a hydrogen bus. There
are only four or five companies in the world working on SP fuel cell technology, and Ontario
should be taking steps to ensure it benefits from the commercial potential of this technology,
should Ballard succeed.
There are significant economic opportunities surrounding the application and use of all
of the fuel cell technologies, including the storage and distribution of hydrogen, and a variety
of integration issues, such as the adoption of the technology to bus and automobile drive sys-
tems and bodies. These are areas where Ontario presently has an industrial base. For instance,
Ontario already specializes in some areas of hydrogen technology; Electrolizer Corporation of
Mississauga, for example, owns 40 percent of the world's electrolysing capacity. And Ontario
Bus Industries and other companies have been leaders in the development of natural gas vehi-
cles.
However, the province's ability to potentially capture the economic benefits associated
with the development and application of fuel cell technology is limited at present. Just as the
"revolution" in information technology and personal computers seemed a long way off in the
late 1970s, so too does fuel cell technology at the present time, so few bureaucrats have taken
an interest, apart from a modest pilot demonstration of the Ballard fuel cell at Dow Chemical,
who manufactures the polymer, sponsored by the Ministry of Energy. However, everyone
knows the magnitude of the economic spinoffs associated with the introduction of personal
computers across a broad array of industries, and the same breadth of opportunities may well
be created by the fuel cell over the next decade.
Ontario is not particularly well positioned at this time to take advantage of these oppor-
tunities.
7.5 Capitalizing on the Opportunity: Access to Capital
Like most smaller Canadian companies that have developed some technology with
which they have started to open the door on a new market. Atlas Polar now faces the challenge
of capitalizing on the opportunity while continuing to invest in the development of new mod-
ules for the load displacement market. In short, the company will need considerable resources
82
so that it can aggressively market the product it already has (the 250 kW unit) and continue to
nvestVn the development of the product. Atlas Polar believes that the Ontario market alone for
hefr cogeneration units will be very large in 3 to 5 years time, before one even s arts ©con-
sider thf potential of a national or international market. However, this potential is still un-
woven which makes it difficult to borrow the money required for market penetration and con-
tinued new product development. These activities should properly be funded with equity capi-
tal but unfortunately, such capital can be difficult to come by for companies like Adas Polar.
Companies needing equity capital to finance new product development or a growth
strateev based on expansion or acquisition, often tum to the venture capital market for this
Si the case of very small firms, or new companies whose capital requirements are st 11
small tup to perhaps $150,000) the "informal" venture capital market is often the right place to
urn High neT worth individuals, particularly those that have made their money through the
creation of a successful business, are often interested in investing in other young companies
whfch appear to have growth potential. The informal nature of this market makes it difficult to
document the amount of such activity that takes place, but we do know that the informal ven-
mre Capital market is an important source of equity capital for many young firms during their
early days.
However as its capital requirements grow, a firm must turn to sources that are more
likelv to able and willing to provide the larger amounts of equity capital required to aggres-
sively pursue their growth opportunities. While venture capital is a $3.5 billion indusnyn
Canada and is a well established part of the capital markets, it has not proven to be a reliable
source of capital for smaller technology oriented firms. At present, there are perhaps four
Canadian venture capital groups that might consider an investment in a mmbAta
Polar even though the "technology" content of the cogeneration unit is limited primarily to de-
Sg "engineering8 Even though Atlas Polar is an established company, (which clearly reduces
the risk relative to a brand new venture) and has already committed its own resources to the de-
velopment of a product for this segment of the cogeneration market, it would undoubted y have
a difficult time securing equity capital from outside sources to pursue its potential in this mar-
ket.
The situation facing companies that are actually involved in the development of new
technologies whose commercial applications are still at some distance in the future, is even
more acme. Ballard technologies is almost conspicuous for its success in attracting a consider-
able amount of venture capital from international sources when its commerce [potential is hk. e y
stiU five years off. It is difficult to find many Canadian companies that have been successful in
this regard.
The issues associated with the availability of venture capital for ^"^-^^
Canadian companies are complex, and a full discussion of them goes well beyond the scope of
mis report. However, Ontario's ability to capitalize on the economic opportunities created by
pohcies to address environmental issues is bound to be constrained by these issues. In essence,
the problem has three parts:
. a limited supply of experienced technology entrepreneurs able to manage and grow a
. Sited supply of venture capital investors who understand the technologies and are
able to really assist and support a technology oriented companies; and
. a limited supply of capital available for these investments.
Much of the discussion about impediments facing technology oriented companies in
Canada has focussed on capital, primarily because that is the easiest of the toe issues to pm
down. But the people issues are just as important and perhaps even more limiting, and they are
83
much more difficult to address. Making more capital available for young Ontario firms devel-
oping and commercializing environmentally related technologies will not, in itself, solve the
problem.
Ontario has a clear commitment to making at least a base level of capital available to
these firms. The Environmental Technologies Program, (launched by the Ministry of
Environment in March 1990 with a five-year $30 million commitment) is designed to stimulate
the development of innovative new products or processes that will protect the environment.
Similarly, the Ministry of Energy has $3 million a year available through its EnerSearch pro-
gram to fund R&D activities focussed on the next tier of commercial energy efficiency tech-
nologies. Innovation Ontario, the province's venture capital fund, invests up to $250,000 in
equity in Ontario technology firms, although there has been little investment activity to date in
environmentally related technology companies.
While there is a legitimate role for the government in providing financial support to en-
courage innovative young firms to engage in pre-commercial development activity, the same
argument cannot, in our view, be made once a product or process is at the commercial stage.
Ontario, along with the other provinces and the federal government, have become more active
in the early stage technology venture capital market because private sector investors have cho-
sen to leave this market. Rather than attempting to step in to fill the resulting gap, the govern-
ment should take steps (on both the capital and human resources fronts) to draw them back. In
so doing, the government would get better leverage from its own investment, and would be
significantly improving the odds of Ontano-based firms participating in and capitalizing on the
economic opportunities that are already being created in response to growing pressures to pro-
tect the environment
7.6 Specific Initiatives For Consideration
There are a number of initiatives that the province could undertake to encourage invest-
ment in the development and commercialization of technologies that can contribute to the re-
duction of CO2 emissions. Such initiatives should be able to support the exploitation of near
term opportunities (like expanded use of natural gas cogeneration in the marketplace) and the
development of new technologies and applications that will give us a competitive advantage in
the longer term (like the fuel cell technology).
Policy initiatives that will support Ontano-based technology companies engaged in the
development and delivery of products and services related to the environment are likely to be
equally relevant to technology firms involved in other sectors. While the proposals set out be-
low go well beyond the specific goal of capturing the economic opportunities that will be cre-
ated by a policy to reduce carbon emissions, they are, nevertheless, appropriated and relevant.
A strategy to foster the growth and success of technology firms serving diverse markets goes
beyond the mandate of any one ministry or agency, and therefore becomes the responsibility of
all. The measures proposed below could play an important role in assisting Ontario-based firms
to take a leading position in the development and commercialization of the technology based
products and services for markets created by growing international concern for the environ-
ment.
1. Establish a strategic procurement programme to support the market
penetration of environmental-related technologies produced by local firms.
A strategic procurement policy, if properly executed, can play an important role in
helping young technology-based companies commercialize their products and increase their
market penetration. Government procurement policy can, therefore, be instrumental in support
of Ontario-based companies which have developed innovative technologies in response to envi-
84
ronmcntal concerns to enter the market on a commercial basis and thereby establish a longer
term competitive position in the market. However, care must be taken to ensure that strategic
support that seeks to help such companies aims to expand their presence in the market, rather
than providing the sole reason for the company entering the market in the first place.
In the case of manv technologv oriented firms, the expanded production associated with
crowing demand for their product serves to reduce the unit cost of producuon, allowing for a
Tower price to the end-user which in turn further snmulated demand and allows the company to
achieve the critical mass necessarv to compete in the marketplace. The inability to achieve this
critical mass is often a major hurdie to smaller innovative firms establishing a strong posmon in
the market Bv pursuing a strategic procurement policy with respect to relevant environmental
technologies, the government could stimulate demand to the point where it could favourably in-
fluence the economics of production.
The situation facing Polar Atlas is a good case in point. Although the company believes
it has established itself in a leading position with respect to small scale natural gas cogeneranon
units the size of its market (and hence the use of small scale cogeneranon units) is constrained
bv the cost of each unit. Increased demand for these units could help to reduce the unit cost and
improve the economics of installing these system in smaller commercial and institutional set-
tings The provincial government, as the owner and proprietor of many buildings could
through its strategic procurement policies help expand the use of cogeneranon units in the insn-
rutional market and, thereby, improve the economics of manufacturing the units in Ontario.
2. Encourage the formation of new pools of venture capital to invest in early
stage technology companies.
To retain Canadian capital for technology investing, it is critical that an experienced
management pool is in place in both the technology companies and the venture capital funds.
However, specific measures are required to stop the flight of capital from the technology sector
that has been taking place in recent years, and to convince pnvate sector sources of capital that
investing in Canadian technology firms can indeed generate an acceptable return on investment.
While the province has been malang an effort to fill the technology venture funding gap
created bv the exodus of pnvate capital sources through the activities of Innovation Ontario
this strategy can be dangerous, since without an adequate supply of co-investors, many ot
these firms will need substantial on-going capital support from government if they are to grow.
If this support is not forthcoming, (which it is unlikely to be, given prevailing fiscal condi-
tions) it is quite likely that many of these companies would fail. Government venture groups
are also often unable to provide the necessary non-financial support and direcnon that many ot
these technology companies badly need and that their competitors in the United States are re-
ceiving from their venture capital backers.
Rather than attempting to intervene directly (which in our view would be neither practi-
cal nor effective) we believe at least a portion of existing government funding for venture in-
vestments and economic development initiatives should be redirected to address the structural
impediments constraining the growth of Canadian technology companies.
Ontario definitely needs more venture capital funds ... not just more venture capital, but
more funds. Syndicating investments among a number of funds is a time proven method ot
spreading risk's and applving more support to individual technology firms. Syndicating also
allows venture investors to learn more quickly from one another and to gain from each other s
network of additional capital sources.
85
Previous research conducted by Venture Economics on the fastest growing Canadian
and U.S. companies showed that the average venture capital backed U.S. growth company in
the sample received $17 million in venture capital from 1 1 venture investors over 3 rounds of
investment prior to going public. In Canada, the average venture capital firm received 1 round
of venture capital totalling $3 million from 1 venture investor. For the Canadian venture capital
investor, the inability to syndicate results in much higher nsk levels per deal and constrains the
scope of the investment opportunity in absolute terms. For Canadian technology entrepreneurs,
more funds mean a more competitive market and more chances to convince investors to partici-
pate in their companies.
More venture capital funds and more technology focussed venture capital would help to
retain the Canadian expertise that has developed, and to increase the probability of combining
expertise and capital to create successful technology companies.
We therefore propose that the Ontario government redirect some of the funds now be-
ing used for direct venture capital investing and economic development initiatives to
seed several new technology focussed venture capital funds .
Such an initiative could be launched by calling for proposals from venture capitalists to
manage technology focussed venture capital funds. A review panel, assembled by the govern-
ment, would select from these proposals in much the same way as a pension fund would de-
cide on a venture fund investment.
The funds selected would be allocated $5-10 million or up to 25% of their target fund
size, subject to raising the remaining amount from private sector sources within 6 months. By
offering its capital on an advantaged basis, government could directly impact the rates of return
achieved by the private sector investors, thereby setting the stage for more private capital to re-
turn to the market.
These advantages need not be costly for the government. For example, the govern-
ment's capital could be made available on a first in-last out basis. The up-front commitment
from government will help engender confidence in other prospective investors. By not taking
its capital back until all private sector investors have done so, the government would be reduc-
ing the holding period for the private investors between drawdown and return of capital by one
or more years, and thereby increasing the rate of return.
As an additional inducement, the gains attributable to the government could be at one-
half the rate available to the private sector investors. Management of the funds, which would be
structured as limited partnerships, would be entitled to its share of gains only after the con-
tributed capital was returned to both the government and private sector investors.
There could be perhaps six of these new funds in Ontario and they would be run as pri-
vate sector venture funds with no government intervention. They would be required to report to
the government as they would to their private sector investors, and would be restricted only in
broad, overall terms, although funds intending to focus on technologies related to the environ-
ment could be given higher priority. Venture capital managers from the U.S. and abroad
should also be encouraged to establish new technology-focussed venture capital funds under
this program. In so doing, the government would also be taking steps to strengthen the base of
management talent available in the venture capital community.
The cost of such a programme may be less than Tent direct government intervention
and returns would likely be higher. Private sector ventu :unds typically charge management
fees of 2.5% to 3.0% of committed capital per annum. Many of the government venture
funding groups in Canada have management costs in the order of 5% to 10% of capital. The
86
privately managed funds would be able to set their own compensation levels (within their fee
structure) and, because of the possibility of sharing in long term investment gains, would be
able to ensure the long term continuing involvement of their investment managers.
Proposals to manage these funds could also come from management of existing gov-
ernment venture capital programmes. Within these groups there are a number of talented and
experienced venture capitalists, who could form effective fund management groups with
private sector investors.
Funds formed in response to this initiative could be encouraged to form close links with
government agencies involved in the development and commercialization of environmental and
energy related technologies. Selected initiatives which, in our view, would at least start to ad-
dress the shortages of skilled entrepreneurial managers, knowledgeable technology investors
and capital that are impeding the development and success of Canadian technology companies
are as follows:
3. Encourage re-investment by Canadian technology entrepreneurs.
Informal private investors can make a valuable contribution to the pool of experienced
entrepreneurial managers by providing capital and business support to fledgling technology
firms and continuing to provide counsel as the business matures. Given that research has
shown that the majority of informal investors are experienced business builders and company
founders, these investors can also help offset Canada's shortage of experienced venture capital
technology investors.
The investment vehicle of choice for many of these investors has been through the
Small Business Development Corporation programme which provides a tax credit to such com-
panies which invest in eligible firms. Since this programme was launched with the intent of en-
couraging the establishment of local or regional venture capital companies, rather complex
safeguards were built in to ensure that the money was invested quickly, in the right types of
companies and using certain equity structures.
We encourage the government to re-consider the SBDC programme and to
replace it with a simplified programme that would enable informal investors to make
direct equity investments in eligible technology businesses and obtain an immediate
30% cash grant in return. The investor would be required to hold his investment in the
company for a minimum of four years. The maximum cash grant and the minimum
investment level could be adjusted over time to control programme costs and ensure that
only serious investments are made.
7.7 Conclusion
The issues related to encouraging the growth and success of Canadian technology com-
panies are complex, and there are clearly no easy solutions. We believe that these broader ini-
tiatives, coupled with the more focused measures in the first set of proposals, could be a first
step towards realizing some of the economic potential associated with emerging environmental
policies.
To enhance the potential for Ontario technology companies to attract Canadian man-
agement talent from that has gone to the U.S. or abroad, we believe government can play an
important role in terms of information and awareness classified above. To this end, marketing
materials should be developed to explain the technology business and research environment in
Canada to foreign executives, and to describe who the players are, what Canada has to offer,
87
and how they can learn more. Launching such a marketing campaign in co-operation with in-
dustry associations or selected technology sectors would enhance its effectiveness (and could
be integrated with efforts to draw Canadians back to Canada, as discussed below).
ENDNOTES
^Ontario Hydro, 1990 Non-Utility Generation Plan, Toronto (September 1990)
88 Acres International, Ltd., Cogeneration Potential in Ontario and Barriers to its Development,
Ontario Ministry of Energy, Toronto, (February 1987)
^Interview with Adas Polar executive
88
CHAPTER 8— ROLE OF ENERGY UTILITY REFORM
"Exploiting the full menu of efficiency opportunities can double the quantity
and more than halve the cost of savings, because saving electricity is like
eating a lobster: if you extract only the large chunks of meat from the tail
and claws and throw away the rest, you will miss a comparable amount of
tasrv morsels tucked in crevices."
Amory Lovins, in a recent article in Srienrjfic American
8.0 Introduction
Reducing CO- emissions 20 percent from 1988 levels by 2005 will require an ambi-
tious effort on the part of utilities, government, and the private sector to achieve market pene-
tration of efficiency retrofit programmes in the 50-to-70 percent range for existing buildings
and industrial activities, and 100 percent for new ones. While capturing the potential energy
savings and avoiding the "lost opportunities" in new buildings and equipment is a matter of
political will— the province already has at its disposal many of the regulatory instruments
necessary to do the job— the Coalition would agree that achieving high market penetration ot
efficiency measures in existing building and equipment stocks presents a difficult challenge,
given the' barriers already enumerated in the sectoral chapters.
This chapter examines the kev factors needed for the design and implementation of de-
mand-side management programmes that achieve high participation rates and significant reduc-
tions in energy demand. In addition, the rationale and basic elements of law and regulatory re-
forms needed for utilities to fullv participate in implementing a global warming strategy in
Ontario are proposed. These include measures to encourage Ontario's utilities to adopt least
cost planning" or "integrated resource management" as the basis for delivery of energy services
to the public, including: (i) approaches that could be taken within existing legislation, (n) sug-
gestions for amendments of the pnwer Corporation Act and for strengthening the role of the
Ontario Energy Board in utility regulation. In addition, the feasibility and desirability ot estab-
lishing a new energy conservation and renewable energy utility is examined.
8.1 Key Elements of Successful Demand-Side Programs
A recent survey of utility commercial/industrial conservation and load management pro-
grams (C&LM) across the U.S. prepared for the New York State Energy Research and
Development Authority indicates that typical C&LM programmes are reaching less than five
percent of eligible customers and are reducing energy use among those customers by less than
10 percent *° While such information seems discouraging, it is important to keep in mind that
most U.S. utilities are only now just gearing up such programmes and have only a few years
experience with them. Furthermore, this survey, along with another recent one by the U.b.
Oak Ridge National Laboratory, did identify a number of programmes that are achieving
penetration rates in the order of 70 percent or more of targeted customers at a cost to uu hues ot
SO 04 per kWh saved, even with allowance made for "free nders", customers who would have
eventually installed such measures on their own in the absence of incentives from the local
utility.91
The programmes identified with highest customer participation and energy savings all
appear to have common elements. First, they are multiple end-use programs that attempt to ad-
dress all commercial and industrial end uses at once, rather than concentrate on specific end
uses on a piecemeal basis. Second, they share common financial and non-financial programme
elements:
89
• Financial elements. Financial incentives that pay 50 percent or more of the direct
installation costs of measures are a key to success; in the New York survey these aver-
aged about $0.03 per kWh saved. Varying the level between low and moderate finan-
cial incentives apparently has little affect on market penetration.
• Non-financial elements. The most successful programmes are of two types: (i)
comprehensive, combining multiple marketing techniques, regular personal utility
contacts with customers, across-the-board technical assistance, and simple programme
procedures and materials, and; (ii) performance contracting, in which private energy
service companies are paid each year for energy savings based on the utility's full
avoided costs. In both approaches, the promotion of new technologies not readily
available reduces free riders, although initial participation rates may be lower as
customers gain familiarity with them.
Third, top management in utilities offering such programmes typically send a strong
message to staff and customers that C&LM programmes will benefit them, with some utilities
rewarding managers with bonuses that are linked to goal achievement. Finally, environmental
groups are typically involved in such programmes through the "collaborative process", in
which utility representatives, environmentalists, and other outside specialists participate in the
design and implementation of programs.92
A sample of the electricity savings from implementation of the most successful pro-
grams with high penetration among targeted customers is shown in the accompanying table.
Table 8 (a): Average Electricity Savings from American Utility End-Use
Programs
Utility
Boston Edison
Boston Edison
Bonneville Power Authority
Bonneville Power Authonty
Northeast Utilities
Puget Power and Lighting
Southern California Edison
1 C-comprehensive ; P-perlormance contracting, R-rebate
Source.Steven Nadel. Lessons Learned: A Review of Utility Experience with Conservation and Load
Management Programs for Commercial and Industrial Customers. ACEEE. Washington DC (1990)
Keeping in mind that most of these programmes are still at the pilot stage or have only a
few years operating experience, they appear to point in the direction that Ontario's utilities and
regulatory milieu should go if the provincial government is to follow through effectively on its
commitment to the nuclear moratorium and to implement a CO; emissions reduction initiative.
The implications for change in Ontario's utilities, however, would be quite significant,
pointing towards a regulatory milieu in which "least cost planning" or "integrated resource
planning" become the basis for utility demand-supply decisions. Such planning involves con-
sistent assessment of the variety of demand and supply resources to cost effectively meet cus-
tomer energy service needs, and it includes a number of features not yet common in Ontario:
Average
Program
Type'
energy
savings
Design Plus C
ENCORE P
Commercial incentives pilot C
Purchase of energy savings P
Energy Action C
Commercial Conservation Financing C
Hardware Rebate R
22-23%
15%
12%
11%
11%
10-12%
7%
90
explicit consideration of energy efficiency and renewable energy programmes as
alternatives to power plants and new supplies of natural gas;
consideration of complete environmental costs in the pricing of energy;
active public participation in the planning and implementation of demand-side pro-
grams;
• analysis of the uncertainties and risks posed by different resource options and external
factors.93
None of these elements are yet common to utility regulation, planning, and management
in Ontario. Energy efficiency programmes are undertaken largely to satisfy public demand for
them, not because they may be inherently the least-cost way to provide a service to customers.
Environmental factors are not yet considered in energy pricing policies, as they are now in a
number of jurisdictions in the U.S. The public, rather than being involved in the planning and
implementation of programmes, is faced with several years of environmental assessment
adversarial proceedings. And finally, the variety of risks associated with supply (and demand)
options are not analyzed and considered in the regulatory process.
In terms of programme initiatives, the province's largest utility, Ontario Hydro, gives
the appearance of moving in the right direction. For instance, it has recently undertaken the
Guaranteed Energy Performance Program (GEPP), which offers incentives to performance
contractors who guarantee economic performance of electrical energy savings projects. On the
surface, the programme resembles the innovative and successful initiatives that American
utilities have mounted in recent years, moving away from the piecemeal approach and toward a
multiple measure end use approach.
This promising effort as initially designed, however, may achieve only modest market
penetration and energy reductions. The application process for performance contractors is
complicated and demanding. The incentive funding, up to $700 per kW of peak demand reduc-
tion falls far short of the avoided cost incentives now paid by some American utilities, stopping
at 50 percent of die costs of a project. And the contractor has to wait a year to recover any costs
under the performance option, discouraging capital investment in significant energy measures,
while encouraging contractors to opt for the conventional piecemeal prescriptive option because
revenue can be earned more quickly under that approach. In fact, the design of the programme
appears to run counter to its intention, which is to motivate the private sector to make deep cuts
in energy use.
Nonetheless, the GEPP programme is a step in the right direction, and Ontario Hydro
will no doubt make improvements in it as managers gain experience with performance
contracting. Nonetheless, the faults with the initial programme design, as with so many Ontario
Hydro demand-side initiatives, really reflect the attitudes and procedures that are endemic to a
large, centralized bureaucracy whose primary mission is to deliver reliable supply to its
customers.
Ontario's Hydro's present policy, for instance, is to seek financial leverage in the pri-
vate sector for energy efficiency, so GEPP and other programmes pay no more than 50 percent
of the costs of measures. While this policy stretches the limited funds available for energy effi-
ciency, it also prolongs the treatment of demand-side management as merely one of the ex-
penses of doing business, rather than as a long-term investment designed to avoid new supply.
Unless Ontario Hydro is willing to pay fully up to the avoided cost of new supply for demand
reducing investments, the market penetration and energy reductions achieved with the measures
will understandably continue to be modest in the future.
Comparable issues with respect to the regulatory treatment of Ontario's gas utilities
cloud their future ability to market cost effective efficiency measures. Presendy. they are regu-
91
lated in such a way that their financial interest lies in expanding the distribution system for nat-
ural gas and in leasing equipment to customers. The only reason the utilities would lease a high
efficiency, as opposed to a medium efficiency, gas furnace to their customers is if there is
strong demand for it or if there is potential for greater net revenues. Profit is not related to effi-
ciency. And even though installation of air sealing and insulation is likely to prove a more cost
effective way to reduce natural gas use for heating, allowing the furnace to eventually be
downsized, the utilities have no self-interest to finance such an option. Even simple measures
are discouraged. If a customer wants to buy an inexpensive insulation cover for an existing
medium efficiency water heater, for instance, it won't be available from the utility because its
marketing strategy gives preference to leasing new water heaters.
The Coalition concludes that without fundamental reform of Ontario's electric and gas
utilities — and the regulatory milieu in which they operate — the efficiency and renewable energy
measures outlined in this report could not be achieved.
The following sections outline the Coalition's suggestions for reform of Ontario's elec-
tric and gas utilities and regulatory structure towards providing the people of Ontario with least
cost energy services.
8.3 The Ontario Energy Board
In order for Ontario's utilities to adopt least cost planning as their modus operandi, a
fundamental change in their regulatory milieu needs to occur. The initiatives and reforms
heretofore mentioned imply expanded authority for the Ontario Energy Board (OEB) with re-
spect to the regulation of Ontario Hydro and the province's other utilities. The Ontario Energy
Board Act (OEBA) establishes the OEB and accords to it various regulatory funcnons.
The authority of the OEB with respect to Ontario Hydro is very limited at present. The
OEB merely requires notification by Hydro in the event that Hydro changes its bulk rates, with
the OEB's subsequent review and advice to the Minister of Energy being non-binding..
Secondly, the OEB A allows the Minister of Energy the authority to refer other rate-related
matters to the Board. In either case, the Board has no decision-making authority and simply re-
ports to the Minister upon its deliberations. The Coalition believes that the OEB should be re-
garded as the appropriate institution to regulate a variety of energy-related matters. The major
features of this expanded mandate are included below.
Currently, the OEB employs rate making principles for gas utilities such that if On-
tario's gas consumption increases then the gas utilities' profits will increase. Consequently,
conservation is not in their financial self-interest. However, conservation would be profitable
for the gas utilities if the following reforms were adopted by the OEB:
least-cost rate making mechanisms that encourage conservation;
• establishment of rate making mechanisms that sever the link between a utility's profits
and its natural gas throughput volumes;
• financial bonuses for privately held utilities that cost effectively reduce their customers'
energy consumption.94
Further to the earlier discussion of reforming Ontario Hydro's mandate, amendments
should be made which give the OEB binding regulatory control over the Corporanon's:
rates and its rate-setting function, including its buy-back rates;
Ontario Hydro's systems expansion proposals;
• Ontario Hydro's borrowing programme.
92
The OEB should be given jurisdiction over the approval of the costs projected for mu-
nicipalities, municipal Hydro utilities, the Ontario Energy Conservation Corporation or other
agencies delivering demand side endeavors. The OEB would evaluate proposals and decide
whether Ontario Hydro must pay for them. Similarly, for joint programmes involving gas and
electricity conservation the OEB would be responsible for allocating funding between utilities.
The same responsibility would arise with respect to multiple fuel projects.
Finally, in order to expand the OEB's role as a major facilitator of public participation
in the energy planning process, the following would be in order:
The OEB would assume responsibility for decisions regarding the regulation of Hydro
which are presently reserved for Cabinet. This decision making authority would extend
to financial approvals for all Hydro projects and shall be based upon the least cost
planning principle outlined earlier,
The Consolidated Hearings Act. 1981 shall be amended so that the OEB and the
Environmental Assessment Board (EAB) would constitute a joint board for the purpose
of reviewing provincial energy plans and making recommendations to Cabinet;
The joint board would also be responsible for handing down decisions regarding
Ontario Hydro projects based on the principles of wise environmental management and
least cost planning. This would avoid unnecessary duplication of decision making ef-
forts which would occur if the boards met separately.
• Where Ontario Hydro is required to submit an environmental assessment of a proposed
undertaking under the Environmental Assessment Act and no hearing is required, the
OEB shall not make any decision with regard to the undertaking prior to its approval by
the Minister of the Environment.
The OEB would also continue to have the power now available to it pursuant to the
Intervener Funding Project Act to provide funding and assess costs with regard to pub-
lic participation in any matter within the Board's jurisdiction even if the A£I were to be
repealed.
8.4 Proposals Which Rely Upon Existing Regulatory Tools
At present, there are two instruments which could be used to achieve some of the initia-
tives outlined in this chapter and would require neither immediate amendments to existing legis-
lation nor the introduction of new legislation. They include: issuance of a policy statement by
Cabinet and/or drafting a memorandum of understanding between the Minister of Energy and
Ontario Hydro.
The Cabinet, once it develops a general policy and goals with respect to global warm-
ing, should consider directing the Minister of Energy to formulate a memorandum of under-
standing with Ontario Hydro. The Corporation would be required to use its best efforts to en-
sure that such exercise broadly conforms to the measures included in the global warming pol-
icy. Such a memorandum is presently being prepared by the Ministry with respect to other
matters. It makes sense that the goals, targets, and strategies with respect to global warming be
also addressed, should the Cabinet be able to reach a consensus on government policy on
global warming in a timely fashion.
It is recommended that the memorandum of understanding currently being prepared for
implementation include the following measures as pan of an initial strategy to reduce CO; emis-
sions from power generation:
• Ontario Hydro's planning framework should seek to minimize the total societal eco-
nomic and environmental costs of its operations;
93
• In order to significantly reduce Ontario Hydro's CO2 emissions rate by 2005, much
greater emphasis should be placed on the substitution of parallel generation for coal-
fired generation to reduce to 10 percent or less of the generation mix, including increas-
ing the buy-back rate to better reflect the avoided cost of centralized nuclear supply;
• Energy efficiency programmes should encourage greater participation of the private
sector, along the lines of the GEPP initiative, and the policy of financial leverage that
has constrained the effectiveness of Ontario Hydro efficiency initiatives should be
abolished in favour of full avoided cost of new supply being offered for efficiency
services;
• Ontario Hydro should encourage the participation of the public in designing and imple-
menting its energy efficiency and renewable energy initiatives.
8.5 Amendments to the Power Corporation Act (PC A )
Several amendments to the PCA would be necessary to implement a new conservation
strategy for Ontario. Here is a summary.
Since municipal utilities have the most direct contacts with the majority of energy con-
sumers, their involvement in energy efficiency, renewable energy, and cogeneration will be
essential to achieving high levels of market penetration. In order to encourage their greater ini-
tiative, Ontario Hydro's authority over municipal utilities needs to be modified to decentralize
decision-making in several key areas:
• municipal utility rates and charges for supplying power,
• the municipal utilities' borrowing programmes for improvements to a power system;
• the management of surplus funds accrued by municipal utilities;
• the appointment of members to municipal electric utility commissions.
The result of these changes would be to subject the activities of municipal utilities to regulation
by the OEB and remove their control from Ontario Hydro. They would be able to undertake
their own energy efficiency and power generation projects, which would most likely be small-
scale cogeneration initiatives in the commercial sector. They would be able to contract for pro-
vision of energy efficiency services to their customers. They would be able to adjust their rates.
Historically, Hydro has enjoyed several advantages over the private sector in fulfilling
the requirement of producing and selling "power at cost". Subsidies such as tax exemptions
and exemptions from dividend payments should be removed. In addition, the Debt Guarantee
Fee should be raised to reflect the full extent of the benefit which accrues to Ontario Hydro
from their lower interest rates. If the true cost of electricity is reflected in the prices consumers
pay for it then a positive inducement towards energy conservation will be created. True costing
will increase the efficiency and accountability of the energy sector. Similarly, buy-back or pur-
chase rates for independent or parallel generation must directly reflect Ontario Hydro's full
economic and environmental costs. All of these costs should be listed as allowable costs to be
charged by Ontario Hydro under the PCA.
Revisions to the PCA are also required for the purpose of including environmental
considerations in all decision-making processes related to power production. Environmental
priorities must be accorded the same weight in decision-making as economic priorities.
Presently, concerns as to the production of power at cost are restricted to the evaluation of the
Corporation's financial or monetary costs. The PCA requires Ontario Hydro to produce power
by minimizing financial costs, not the total of social and environmental costs. Therefore, the
Act must be amended to allow for consideration of these variables in the decision-making pro-
cess.
94
Finally, the PC A. Section 56(b) imposes constraints on Ontario Hydro with respect to
the geographical scope of its energy efficiency programmes, loans, etc. and restricts fuel
choices for buildings. Program managers at Ontario Hydro, for instance, believe the PCA
restricts their offering efficiency programmes in buildings heated with natural gas. And the law
expressly forbids switching to natural gas from electrical service. Such provisions should be
repealed or amended. The PCA should enable Ontario Hydro to be able to pay the costs of
conversion programs conducted by other agencies where required to do so by the Ontario
Energy Board or other government policy, and Ontario Hydro's managers should be allowed
to offer services to customers who own buildings served with natural gas.
8.6 Seed for a Comprehensive Ontario Energy Plan
A broad consensus exists with respect to the long failure of government to provide ade-
quate policy direction to Ontario Hydro, and a commensurate lack of public participation — until
the recent environmental assessment process concerning regarding Hydro's demand-supply
plan — in Hydro's policy direction. The Corporation's present long-term planning process takes
place in a virtual policy vacuum. The role of government, at least in the incipient stages of the
electrical system planning process, appears to be only at the invitation of Hydro.
Therefore, it is recommended that a comprehensive energy plan for Ontario be devel-
oped and implemented along the following lines for the the various sectors:
development of a provincial energy plan with comprehensive assessment of environ-
mental, social, and economic effects through a consultation process that involves a
broad range of interest groups drawn from community organizations, the public, and
private sectors;
the provincial energy plan would provide for the development of further efficiency,
conservation and demand options as have been adopted by other jurisdictions; the plan
should direct those engaged in sectoral planning to give priority to, in descending
order, conservation, efficiency, demand, and only then supply options;
the plan, once developed, would be referred to the joint board composed of OEB and
EAB members.
8.7 An Energy Conservation and Renewable Energy Utility
The PCA establishes Ontario Hydro as a Crown corporation and sets out the decision-
making authority and responsibilities of the Corporation and its Board of Directors. While the
Environmental Assessment Act, the Ontario Energy Board Act, and other provincial and federal
statutes are of some relevance with regard to Ontario Hydro's activities, the PCA provides the
basis for the contract that this province has with the corporation, identifying the rights, duties,
and obligations of the arrangement. The Acj establishes the purposes and business of Ontario
Hydro as including the generation, transmission, distribution, supply, sale and use of power.
In addition, Ontario Hydro is responsible for the provision of energy conservation
programmes.
In the Coalition's view, Ontario Hydro at present is not naturally predisposed to plan-
ning or implementing the ambitious energy efficiency and renewable energy programmes
needed to achieve the aims of COz reduction and the nuclear moratorium. It is large, highly
centralized, and by corporate self-interest and expertise mostly oriented towards the provision
of capital-intensive energy supply. On the other hand, the majority of cost effective
conservation and energy efficiency measures are small, decentralized, and technologically
simple, basically at odds with Ontario Hydro's corporate culture. While there are many
dedicated, highly motivated, and skilled managers working in the energy efficiency area, the
95
market penetration and effectiveness of their initiatives are unduly constrained by corporate
policies.
The adoption of a least cost planning mandate will require a fundamental change in
Ontario Hydro's corporate culture. The most important change will be decentralization, mean-
ing significant facilitation of the role that municipal utilities, municipalities, and a variety of pri-
vate sector energy service companies and neighborhood organisations play in energy conserva-
tion programmes. There will be more vice presidents of customer service, and individual
employees will have more independence and authority to make decisions. Meanwhile, over
time the role of engineers will decline, while the importance of psychologists and market
researchers will rise.95
Some members of the Coalition are skeptical that such a fundamental change in corpo-
rate mandate and culture will ever take place at Ontario Hydro, primarily because it is a
monopoly whose bureaucratic self-interest is naturally to resist change. Hence, alternative ap-
proaches to the delivery of energy efficiency measures and renewable energy programmes to
the public also need to be explored.
One possibility would be the establishment of a new utility in Ontario whose mandate
would expressly be to provide such measures and programmes. Such a utility would offer
several advantages.96 The primary one is that its mandate would be clear — the achievement of
energy savings and development of renewable energy — and its revenues would be directly
proportional to the success of its initiatives. Ontario Hydro and the gas utilities, however,
would be in no way be precluded from pursuing energy efficiency measures.
The new utility would have a number of disadvantages, however. The market barriers
to getting conservation and renewable technologies into homes and businesses could be
greater, since it would take time to build public visibility and trust. There would also be the
danger that the measures, once installed in homes and businesses, would not be well main-
tained. The new utility would have to be structured in such a way so that local municipal utili-
ties and neighborhood organizations assume a prominent role in the delivery of programmes at
the community level. Finally, it would take precious time for the new agency to be set up and
to gain credibility with the public.
Once under way, the new utility would offer a full range of research and development
initiatives, products, services, and performance contracts aimed at improving the energy effi-
ciency of existing and new buildings, equipment, and processes, including:
energy surveys and audits to identify the economic potential of the full range of retrofit
technologies available;
extensive education and training of performance contractors, private and municipal en-
ergy inspectors, building managers, etc.;
• financing in a wide variety of forms and forums, including performance contracting,
leasing, grants, loans, and rebates, to motivate the private sector to adopt energy effi-
ciency and renewable technologies and achieve the economic potential that has been
identified and targeted;
• technology development and commercialization to nurture Canadian technical innova-
tions and entrepreneurship, including strategic research and development and venture
capital initiatives designed to attract and leverage private investment.
The new utility would be funded at the full avoided cost of new energy supply by
Ontario Hydro and the province's gas utilities, a rate to be determined by the Ontario Energy
Board. Additional revenues would be generated by the leasing of equipment, such as solar
water heaters, to customers. And the new corporation would be free to form joint ventures and
96
other collaborations with private enterprise to commercialize and market new technologies. The
more efficiency and renewable energy it were able to sell, the higher the utility s revenues
would be. while competition would ensure the public receives services and products at the least
economic cost to them, up to the cost of new supply.
8.8 Conclusion
In conclusion, Ontario utilities should have a key role to play in the implementation of a
provincial global warming strategy. As presently structured, however the utilities would not
be able in the view of the Coalition, to achieve the 50-70 percent market penetration of effi-
ciency measures with respect to existing buildings, equipment, and processes outlined hereto-
fore in this report. The primary reason is that energy efficiency and renewable energy measures
are not presently enough in the corporate self-interest of the utilities, despite the fact that such
measures are economic and pav back handsomely in saved energy costs. The regulatory
agency, furthermore, has neither the nght mandate nor the power to guide the utilities to
change.
The Coalition favours law and regulatory reforms to change the way utilities plan, op-
erate and finance themselves, as well as to improve public participation in utility planning.
Such'reforms would ensure that energv efficiency and renewable energy measures pay back to
the utilities, and ultimately to the rate payers, thus improving the chances that the economic
savings that are possible with such measures can be translated into energy and CO; savings
over the lone-term. As a hedge against the difficulties of achieving such fundamental reform,
however the Ontario government should seriously explore the feasibility, costs, and the po-
tential rewards and risks involved in establishing a new conservation and renewable energy
utility.
ENDNOTES
^Steven Nadel, Lessons Learned: A Review of Utility Experience with Conservation and Load
Management Programs for Commercial and Industrial Customers, American Council for an
Energy-Efficient Economy, Washington. D.C. (April 1990)
'•Linda Berrv, The Market Penetration of Energy-Efficiency Programs, Oak Ridge National
Laboratory. ORNL/CON-299, Oak Ridge. Tennessee (April 1990) ITtlv~
"William B. Ellis. The Collaborative Process in Utility Resource Planning, Public Utilities
Fortnightly, June 22, 1989 . ,,-,•■ T (rccc
"Eric Hirst et. al.. Integrated Resource Planning for Electric and Gas Utilities In ALhfcb
Proceedings of 1990 Summer Study on Energy Efficiency in Buildings. Washington D.C.
(19901
9'Jack Gibbons, "Switching Tactics." The Globe and Mail. April 16, 1991
"Eric Hirst, Possible Effects of Electric-Utility DSM Programs, 1990-2010, Oak Ridge
National Laboratory. ORNUCON-312 (January 1991)
^Steven Shrybman, Submission of the Canadian Environmental Law Association to the
Ontario Select Committee on Energy, April, 1986.
97
CHAPTER 9— SUMMARY AND CONCLUSIONS
"A respect for planet earth, a respect for our fellow citizens around the
world, and our love for our families to follow, all require that both as indi-
viduals and as a society we must consumer fewer resources, even if we
want and would like to consume more. Changing doesn't just mean chang-
ing other people. It means changing ourselves, changing our communities,
changing our companies, changing how we produce things, distribute them,
and get rid of the waste."
Bob Rae, preface to Greening the Part\: Greening the Province (1990)
9.0 Summary of C02 Reductions
Measures that the Coalition deems economically attractive to society have been identi-
fied to reduce CO2 emissions in Ontario's residential, commercial, transportation, and indus-
trial sectors, and they are described in Chapters 2-6. The following highlights the most signifi-
cant measures:
Residential Sector
all new houses are built to the standard of the Advanced House in Brampton by 2005,
i.e., they will use one-third the energy of today's new houses;
space heating needs in 75 percent of existing homes are cut by 25 percent by 2005 by
retrofitting a combination of air sealing, insulation, improved windows, and high effi-
ciency furnaces;
electric appliances will be replaced by models 20-to-40 percent more efficient;
thirty percent of existing homes will get their domestic hot water from solar hot water
heaters.
Commercial Sector
all new commercial buildings will use half the energy per metre of floorspace as the
existing stock of buildings by 2005;
space heating needs in 50 percent of the commercial building stock are cut by 20 per-
cent by 2005;
high efficiency lighting retrofit in 75 percent of the existing building stock reduces
electricity use from lighting loads by 60 percent;
a reduction in energy use from plug load of 20 percent by 2005, through efficiency im-
provements in office equipment, computers, etc.;
downtown Toronto buildings connected to the city's district heating system are cooled
during the summer with cold lake water using a concept called Freecool.
Transportation Sector
a combination of gas guzzler taxes and sipper rebates are introduced and gradually in-
creased annually to improve the on-road fuel economy of passenger cars in Ontario
from the present 1 1.4 litres per 100 kilometers to 6.7 litres per 100 kilometres by 2005;
public transit ridership in the Greater Toronto Area is doubled through land use controls
that create an urban boundary around Metro to encourage higher densities and signifi-
cant new investments in rapid rail transport, utilizing the region's underutilized railway
corridors;
650,000 natural gas vehicles are on the roads by 2005;
ethanol manufactured from woody biomass is used in a 10 percent blend for all gaso-
line autos.
98
. an^Sfo^ energy in the pulp and paper industry is cultivated on a 100 percent
rentable basis permittine the CO: directly emitted to be reabsorbed in biomass
Sow* Sat occurs as a result selective harvesting practices that allow natural regenera-
u?n cabined rtA adequate silviculture, which assumes present practices are not sus-
. SSrikl heat is cut 25 percent, and Degeneration's , full economic potential is realized;
. motive power use is cut an average of 27 percent throughout industry.
These and other measures result in a net reduction by 2005 of. 31^«onnes i (Mi)
■ ■ ' fmm 9 1Q88 base of P5 Mt a reduction of 25 percent by 2005 from that base. At
leTs haTf of the educLnsltl ^nTa significant cut in the CC, emissions rate of elecmcny
due to me subsnruuon of natural gas cogeneration for coal-fired power, as wel * demand -side
measures in the electricity sector. The analysis covers about 75 percent of the province s total
CO. emissions base. The results are summarized in I able V (a).
Table 9 (a)-Summary of Estimated Ontario's C02 Reductions, 1988-2005
1988 1988 2005 2005 Amount %
Sector .nergy CO, energy CO. reductions change
PJ
Mt PJ Mt Mt
Residential 473 29.3 453 193 10 34*
Commercial 188 11.9 205 6.5 6 46 /
Transportation 295 20.0 223 13 5 6 33/
925 63.3 971 54.1 10
295 20.0 223 13.5 6
industry 925 63.3 971 54.1 10
TOTAL' 1.881 124.5 1.852 93 4 32 -25 /«
Ontario TotaP 2,576 164 3
175 percent o< the province's CO2 emissions base krMnA„ a\
2100 percent of the province's C02 emissKDns base (Ministry of Energy data-Appendix A)
The following sub-sectors, which account for about 25 percent of the provinces CO:
base in 1988, are not included in the analysis:
. the "other" categorv of the commercial energy sector, accounting for about 3 1 percent
. Z^^^^L and marine transportation, a total of about 53 per-
. ^^n^^^^^^^ 'hentical processes, accounting
for about two percent of the province's CO: emissions in 1988.
If the availability of data, time, and resources had permitted, ^e Cof ition's research
team would have followed several lines of inquiry with respect to these particular areas.
In the commercial sector, Ontario's Hydro's data were ^^J^S^'Sto'i'Sd ule
the most electricity intensive of all the sectors, and we would e ^«0"«™ ' "> £j ^^
breakdowns to be carefully researched. There is a significant ^^n^0^^^^.
Ontario Hvdro's and the Ministry of Energy's estimates ^^p.^^J^^^
tor, with Ontario Hydro's estimates 44 percent lower than the ^rusffy \'*™*^f™h™£
their different treatment of multi-residential b"lld,ng>;J^ are
"other" category in the Ministry's estimates. It would be worthwhile to explore wny
such differences, and attempt to resolve them.
99
In the transportation area, future trends in the energy intensity of inter-city and urban
truck freight transport will have a significant effect on CO? emissions in this sector. While
freight has been shifting from rail to more energy intensive modes such as trucks, substantial
efficiency improvements have occurred within each mode. The overall truck freight efficiency
improved by 20 percent between 1970 and 1985 in the U.S., for instance, and comparable
gains are feasible over the next 15 years for the North American truck fleet, since commercial
owners pay more attention to life-cycle costs than do passenger car owners.97 The Ministry of
Energy projects a 20 percent improvement in fuel efficiency of inter-city diesel trucks only.
Extension of this efficiency measure to the overall truck fleet would appear to be a reasonable
measure, but it needs more research.
In addition, urban fleet trucks consist of many vans, and they could be converted eco-
nomically to natural gas or, in a few years, to electricity. The United Parcel Service in the U.S.
recently announced conversion of their entire fleet of delivery vans to natural gas, and southern
California's South Coast Air Quality District is coordinating the purchase of 10,000 electric
vans, some of which may be supplied by an Ontario company. Extension of the province's al-
ternative fuel vehicle programme, which has concentrated mostly on development of an urban
bus, to trucks and vans could be a promising avenue to encourage further CO? reductions in the
freight sub-sector.
Regional passenger and freight rail should also be explored further. While the popula-
tion densities and distances outside of the urban centres may not permit inter-city rail on the
scale typically found European countries, particular "niche" rail corridors may be viable. With
respect to airplane and marine transportation, on the other hand, the province would not appear
to have any policy tools at its disposal to affect the energy intensities of these modes, which are
likely to be mostly influenced by larger economic forces.
Finally, the potential for reducing energy use from the pursuit of other environmental
objectives needs to be explored. The three Rs of waste management — recycling, reuse, and re-
duction— may offer significant opportunities for energy reduction. For instance, many studies
indicate that refillable glass bottles use half the energy that nonrefillables, even when energy
used for transporting the bottles and adding lids and labels are taken into account. The potential
for saving energy in Ontario from policies that encourage reuse, as well as recycling and re-
duction, merit special attention.
9.1 Priority Measures and Policies
Three broad strategies are explored in each sector: efficiency, fuel switching, and re-
newable energy. Each of the three strategies can make an important contribution to reducing
CO; emissions.
Efficiency strategies. A significant role is played by new provincial regulations and
market incentives/disincentives that seek to ensure that new buildings, passenger auto-
mobiles sold in Ontario, and industrial equipment and processes capture as much eco-
nomically attractive efficiency as possible. Improvements in the efficiency of space
heating play, perhaps, the most important role in reducing CO; emissions in buildings.
This assumes a much higher profile for present regulatory instruments, such as the
Energy Efficiency Act and the provincial building code. Implementation of the Act, for
instance, would need to be extended to a much wider variety of products, equipment,
and processes, while the energy provisions in the provincial building code would have
to be upgraded biennially, rather than every five years.
100
. Fuel switching. The substitution of high efficiency natural gas cogeneration for coal-
fired electncirv generation at full economically achievable levels (3,833 megawatts of
new capacitv b'v 2005) is required to lower the CO: emissions rate of electricity genera-
tion by more than half. As a result of this switch in the electricity sector, the switch to
natural gas from electricity for space and water heating in buildings has only a marginal
effect on CO2 reductions' The switch from oil to natural gas for space and water heat-
ing however' has a more significant effect. Fuel switching from gasoline and diesel
fuei to natural gas only has a marginal impact on CO; emissions, reflecting a low mar-
ket penetration (10 percent) of natural gas vehicles assumed in the analysis, although it
has other beneficial environmental effects, such as the abatement of urban air pollution.
. Renewable energy. Ethanol blends for passenger cars and passive and active solar
space hearing in re'sidences make an important contribution to C02 reduction, as does
the use of wood cultivated on a sustainable basis for energy use, as a waste, m the pulp
and paper industry. It is difficult to precisely estimate the contribution of passive solar
and other renewable technologies, such as advanced windows, to residential space
heating especially in homes built 1995-2005, but the contribution is assumed to be-
come progressively larger as the efficiency standards for new buildings are upgraded.
In the industry sector, we assume that the sector's energy demand grows at the histonc
?0-vear rate of 2 1 percent average each vear, rather than the Ministry of Energy's forecast rate
of 2 6 percent The reason is that we believe the Free Trade Agreement and other international
economic factors will spur structural changes in the provinces economy that favour more rapid
crowth of less energv intensive manufacturing and industries. It is a trend that has been evident
through the 1980s that is likely to continue, if not accelerate, after the present recession. I he
lower"rate of energv demand growth, therefore, does not necessarily assume lower economic
growth but rather an further decoupling of economic and energy demand growth. Our as-
sumption lowers the growth in C02 emissions from this sector, compared with the Ministry ot
Energy's forecasts.
In all of the other sectors, the analysis assumes the Ministry's forecasts for growth,
sav in the number of new buildings or passenger automobiles. As explained in the introduc-
tory chapter (section 1.6), however, we disagree with the Ministry's industry sector forecasts,
which were made before the recession and a number of important world events, such as the
unification of Germany and the Middle East war, which are likely to have long-term implica-
tions for the world economy.
9.3 Implications for the Nuclear Moratorium
As a result of the efficiencv and fuel switching measures assumed in the analysis, elec-
tricity demand in Ontario grows about 31 percent from 1988 to 2005 (see Appendix F).
Allowing for Ontario Hydro's assumption that a 24 percent reserve margin is needed, new ca-
pacitv bv 2005 is met by the new Darlington A units, new hydraulic capacity now in the plan-
ning stages, and natural gas cogeneration. As a result, coal-fired power generation declines six-
fold.
Kev to the achievement of a 20 percent reduction in C02 emissions by 2005 is the
substitution of natural gas cogeneration for coal-fired generation in Ontario Hydro s elecmaty
supplv mix, as well as aggressive electricity conservation in all the sectors. These measures it
continued beyond 2005, should enable Ontario to avoid the need for any new nuclear or otiie
central power plants. Indeed, the moratorium calls for even more stringent efficiency and fuel
switching measures than those assumed in this report's analysis.
101
In the residential and commercial sectors, for instance, electric space and water heating
are switched to natural gas in only 20 and five percent from their respective energy bases.
These are fairly conservative assumptions that should be more aggressive for a nuclear mora-
torium scenario. They aren't higher here because the marginal reduction in CO; achieved
wouldn't appear to justify the cost of higher fuel switching targets given present energy pnces,
i.e., as future electricity demand is reduced further, the CO2 emissions rate for electricity ap-
proaches the emissions rate of natural gas heating (assuming coal is displaced by natural gas as
the fuel of choice for electricity generation). On the other hand, were the environmental costs of
electricity supply reflected in the price, more aggressive fuel switching would no doubt be
more economical.
Looking beyond 2005, there will be a need for new renewable energy sources to coun-
terbalance the growth of natural gas cogeneration, in order to keep the C02 emissions rate from
electricity generation as low as possible. While such a long-term strategy is beyond the scope
of this report, the Coalition believes that the generarion of electricity from wood biomass, other
biomass sources such as municipal and industrial wastes, solar photovoltaic cells, active and
passive solar heating, and small scale hydro will constitute significant sources over the long-
term.
The development of these resources, together with continuing aggressive conservation
measures, should enable the province to meet long-term electricity demand while reducing
emissions of CO; and reducing dependence on nuclear capacity. The Coalition does not be-
lieve, therefore, that nuclear capacity is needed over the long-term to meet a provincial CO; re-
duction target, provided the development of renewable energy receives the highest priority.
In two sectors, however, transportation and industry, strategies to reduce CO; do imply
greater electricity use. In urban centres, particularly the Greater Toronto Area, the substitution
of electrified rapid rail for passenger automobiles would add marginally, perhaps several peta-
joules, to provincial electricity demand. In industry, particularly iron and steel, the increasing
use of electricity intensive processes such as electric arc furnaces will reduce CO;, but add even
more significantly to electricity demand.
On balance, the Coalition believes that the nuclear moratorium and a provincial global
warming strategy that seeks to reduce CO; emissions by 20 percent would be mutually rein-
forcing over the next 15-to-20 years, and that nuclear capacity will not be needed over the long-
term to meet C02 reduction targets.
9.4 The Role of Energy Prices
Energy prices and their change over time have a bearing on energy consumption and
investment in efficiency measures. Future prices are difficult, if not impossible to forecast,
however, and they seldom reflect the true costs of energy supply. Furthermore, energy prices
do not necessarily reflect an equilibrium between demand and supply in the "classical" meaning
of economic rules. Prices often reflect political goals and policies meant to enhance the financial
interest of a national or group of industries.
For instance, OPEC's price policies are deliberately formulated to avoid stimulating too
much conservation or renewable energy in industrial economies, which might displace oil over
the long-term. If prices were too low (as they might be in the absence of an international car-
tel), they would lead to regulatory policies in countries like the U.S. to stem dependence on
foreign oil as their domestic oil production dried up. If prices were too high, they would stimu-
late "natural conservation" and development of renewable energy sources. So OPEC keeps its
prices in a "medium" range to keep other nations, especially the U.S., from taking any delib-
erate action at all to restrict imports or to stimulate much energy conservation.
102
Energy prices also do not reflect the hidden burdens of energy production, distribution,
and consumption, including environmental, health, and a variety of other "external" costs. In
Canada it has long been a tenet of public policy that low energy prices are good for an economy
based on resource extraction industries, while mega-projects are good for jobs, so government
subsidies have flowed to the oil and gas sectors, hydro dams, and to the nuclear industry.
Increasingly, however, it is being recognized, and the Coalition certainly believes, that if we
are to depend more on the market to achieve least-cost soluuons to environmental problems, the
true costs of energy must prevail in the market. Therefore, "external" prices must be reflected
in the price of energy, and if precise values for environmental, health, and other costs are diffi-
cult to determine, "placeholder" values that represent an honest best guess should be used.
Higher energy prices, however, may have significant social and economic effects. High
gasoline taxes, for instance, are a burden on the people who live in northern Ontario, who
often must drive their automobiles and trucks long distances in order to make a living. And
higher electricity rates hurt low-income homeowners, who may be more dependent on electric
heating because of its lower capital cost.
The Coalition, in the foregoing sectoral analyses, places emphasis on the need for new
taxes or fees that establish incentives and disincentives to encourage consumers to purchase
more energy efficient vehicles, appliances, or homes at the original point of sale. From an
equity point of view, we believe this approach is superior to energy taxes because it gives con-
sumers a choice, and they are rewarded with a rebate in many cases if they choose a more effi-
cient option. There is a large debate in the economics community, beyond the scope of this pa-
per, as to whether point of sale incentives of disincentives or energy taxes are a more effective
in changing consumer behaviour. From the government's point of view, the point of sale ap-
proach may not be as desirable because it does not typically raise new revenues, since the taxes
or fees that are collected are returned to consumers in the form of rebates. We believe, how-
ever, this approach should receive serious consideration because, in theory, "feebates" should
effectively change consumer behaviour, and they should be more attractive to the public, be-
cause they allow people to "win" if they make the right choice.
This paper does not address the question of a carbon tax. in pan because a recent study
for the Ministry of Energy already covers this subject very well.98 (The Ministry should con-
sider publicly releasing the study to encourage more debate concerning this important issue.)
Furthermore, there is not a consensus among members of the Coalition regarding the desirabil-
ity for a provincial carbon tax. Concerns centre mainly on the potential social and regional
inequities of such a tax, and whether any government, once establishing the tax as a new rev-
enue source, would be willing to target a good portion of the revenues to offset inequities and
to further encourage the environmental goals of the tax by offering rebates to sectors or target-
ing revenues on activities, such as technological research and development, that merit special
support.
In sum, while the Coalition recognizes the importance of energy prices and taxes in en-
couraging efficiency and renewable energy sources, the issue is not fully explored in this pa-
per. In the immediate future, however, the Coalition believes that "feebates", a combination of
taxes or fees and rebates to encourage the purchase of more efficient vehicles, appliances, and
buildings, would give the provincial government an important new tool to encourage energy
efficiency through the market. The province's gas guzzler tax, for example, would be the place
to start. While extending the tax to cover all light-duty vehicles, the revenue collected, rather
than going into the treasury, should be rebated to people who buy more efficient vehicles. This
change should allow the programme to be extended to northern Ontario by adding light-duty
pick-up trucks, since people who purchase the most efficient pick-up trucks available will be
rewarded.
103
9.5 Need for a Provincial Global Warming Industrial Strategy
A major effort over the next 15 years to reduce the energy intensity of the province's
economy and to reduce CO; emissions will create important opportunities for technological and
economic advancement. Recent studies of international competitiveness show that nations with
the most rigorous environmental standards often lead in the export of the affected products.
Germany, for instance, leads in the export of air pollution control equipment and processes, in
part because its stationary air quality standards are among the most stringent in the world.
Japan, on the other hand, has become a leader in the production of fuel efficient automobiles in
pan because of long standing policies that tax large engine blocks. (Since Japan is totally reliant
on foreign oil, this is more of an energy security, than an environmental policy.)
Both countries are now moving to cash in on what they see as an emerging world-wide
market for new CO2 abatement technologies. In perhaps the technological coup of the 1990s,
Germany facilitated Siemen's acquisition of ARCO Solar for a purported $30 million. While
ARCO Solar has been the biggest U.S. producer of photovoltaics (PVs) and perhaps the world
leader in new, thin-film technologies, its sale reflects the lack of an industrial strategy in the
U.S. to capitalize on its own technical infrastructure. What Siemens (and Germany) want is
ARCO's copper indium diselenide (CIS) technology, which in the past two years has estab-
lished new efficiency and stability standards for thin film PVs. While production costs remain a
key uncertainty, many experts believe that CIS manufacture using proven low-cost techniques
for producing amorphous silicon shouldn't be a problem. Recent discussions between Siemens
and Bayemwerke, a utility in Bayerne, Germany, appear to have centered on the possibility of
building a CIS manufacturing on a site previously to be used for a nuclear reprocessing plant.99
With its commitment to a 30 percent reduction in C02 emissions by 2005, Germany's facilita-
tion role in this deal clearly indicates the influence that its global warming strategy has had on
industrial policy. Germany views PV technologies playing an important role in meeting its own
targets, as a start towards gearing up to meet demand in a booming world market in PVs in the
years ahead.
Japan's industrial policy is also supporting the development of global warming and ur-
ban air pollution abatement technologies. Research on the global environment figured promi-
nently in budget requests for 1991 submitted by Japan's Ministry of International Trade and
Industry (MITI). Most of the funding will go towards development of CFC substitutes and
technology to absorb and utilize CO;, projects that will be undertaken by the new Research
Institute of Innovative Technology for the Earth that is expected to open in 1992 in the new
Kansai science city between Kyoto and Osaka.100 Meanwhile, after nine years of intensive re-
search, development, and demonstration by MITI, the fuel cell is about to be commercialized in
Japan. Since fuel cells are the most environmentally benign fossil fuel technology now avail-
able, they will replace the diesel cogenerators that provide electricity and heat for many office
buildings, primarily because air quality regulations governing emissions in urban centres are
expected to become more strict.101 A consortium of Japanese and American companies is al-
ready offering a 200 kilowatt unit, and Fuji Electric Co. now offers a 50 kW unit and has 35
orders from utilities in Japan and Europe.102
There is no reason why Ontario cannot follow the same path as Germany and Japan,
indeed, many opportunities will open up, should the province decide to link an industrial re-
newal strategy to its global warming strategy. For instance, the consortium that is commercial-
izing the 200 kW fuel cell is establishing a' new manufacturing facility at Pratt and Whitney
complex in Middletown, Connecticut. But location of the consortium's permanent engineering
104
and production facility have not been decided, and such a decision will rest primarily on the
course of business development over the next few years.
For the sake of argument, why not Canada? Why not a partnership between Ontario
1 [ydro and/or several municipal utilities to create a substantial internal domestic market for fuel
cells, leading to establishment of the consortium's headquarters in Ontario? Whether or not fuel
cells should figure prominently or not in Ontario's energy supply future, a question that is be-
yond the scope of this inquiry, the bright road ahead for this technology and others, such as
thin film PVs, speak eloquently for the strategic opportunities for technological and economic
advancement that could he ahead for Ontario.
There are a number of generic policy initiatives that the province could undertake to en-
courage investment in the development and commercialization of technologies that can con-
tribute to the reduction of CO; emissions. Such initiatives should be able to support the ex-
ploitation of near term opportunities, tike expanded use of cogeneration technologies in the
commercial and industrial sectors, and the development of new technologies and applications
that will give Ontario a competitive advantage in the longer term, such as fuel cells or PVs.
Such initiatives include:
• establishment of a strategic procurement programme to support the market penetration
of environmental-related technologies produced by local firms;
• encouragement of the formation of new pools of venture capital to invest in early stage
technology companies, especially directed towards addressing the structural impedi-
ments that presently constrain the growth of Canadian technology companies, by redi-
recting some of the provincial funds now being used for direct venture capital to seed
several new technology focussed venture capital funds;
• encouragement of investment by informal Canadian technology entrepreneurs, by re-
placing the Small Business Development Corporation programme with a simplified pro-
gram that would enable informal investors to make direct equity investments in eligible
technologies.
In sum, the government needs to rethink the ways it presently uses venture capital and
technology development funds, which presently do not reach the entrepreneurs pioneering new
energy demand or supply technologies and which are not yet capitalizing on the international
opportunities that are growing in the U.S., Europe, and Japan.
9.6 Need for Utility Reform
Utilities will need to play a key role in implementing a provincial global warming strat-
egy, requiring an ambitious effort on their pan, as well as government and the private sector, to
retrofit existing buildings and industrial activities with efficiency measures. Market penetration
of efficiency measures on the order of 50-to-70 percent over the next 15 years will be neces-
sary to reach the Toronto target.
The key elements required for such an effort include: financial incentives that pay up to
the full avoided cost of new supply for direct installation of efficiency measures; comprehen-
sive programmes that address all specific end uses at once, rather than on a piecemeal basis; de-
centralized programme delivery that emphasizes personal contacts with customers through local
municipal utilities and neighborhood organisations; and the public and customer participation in
the design of efficiency programmes.
Presently, utility energy efficiency programmes contain few of these elements, and we
do not believe that under the present regulatory climate in Ontario the province's utilities are
likely to move much beyond their current efforts, which are not likely to achieve high market
105
penetration. Even when utilities attempt to innovate — Ontario Hydro's ambitious Guaranteed
Energy Performance Program (GEPP) is a step in the right direction — corporate policy may
tend to undermine the effort in the long term. In the case of GEPP, Ontario Hydro's corporate
policy of seeking financial leverage in the private sector for efficiency, while it stretches the
funds available for efficiency measures, prolongs the treatment of demand-side initiatives as an
expense of doing business, rather than as a long-term investment seeking to avoid new supply.
Only up to 50 percent of the costs are covered by the programme, and the limit of $700/kW of
peak demand reduction falls far short of Ontario Hydro's real avoided costs for new electricity
generation.
In the Coalition's view, what is needed in Ontario are fundamental reforms that create a
regulatory milieu in which "least cost planning" or "integrated resource planning" become the
basis for utility demand-supply options. Such planning involves the continuing assessment of
the variety of demand and supply resources to cost effectively meet customer energy service
needs. Steps in this direction call for:
• Strengthening the Ontario Energy Board's regulatory authority with respect to electric-
ity policy and mandating the Board to pursue the implementation of least cost rate
making mechanisms for all provincial utilities that give them greater financial incentives
to invest in demand-side programmes;
Incremental steps using existing regulatory rules, such as a memorandum of under-
standing between Ontario Hydro and the Cabinet, to set out a framework for minimiz-
ing Ontario Hydro's total societal economic, and environmental costs;
Amendments to the Power Corporation Act to decentralize electricity rates and borrow-
ing decisions to enable municipal utilities to assume a greater role; and to give Ontario
Hydro greater flexibility with respect to the choice of fuel use, allowing it to implement
efficiency and cogeneration programmes in gas territories;
• Formulation of a comprehensive provincial energy plan for the various energy sectors;
• Consideration of a new energy conservation and renewable energy utility to plan and
implement energy efficiency and renewable energy programmes throughout the
province.
These initiatives will not only improve the prospects for achieving significant provincial
CO; reductions by 2005, by increasing the market penetration of energy efficiency and renew-
able programmes sponsored by utilities, but they would be essential in any case, the Coalition
believes, to implement the nuclear moratorium.
9.7 Conclusion
The purpose of this report — the product of two months of consultation among the
Coalition's members, government officials, and private sector executives — is to suggest strate-
gies, measures, and specific programmes that, if they could be undertaken, would enable
Ontario to undertake a credible effort to achieve a 20 percent reduction in CO; emissions from
1988 levels by 2005. Although our rough quantitative analysis indicates that the Toronto target
may be economically attractive at least with respect to the sectors and sub-sectors that were
examined in depth, we wish to emphasize that the report does not address in detail the extent of
the programmes needed nor the costs of the investments required. Further study much beyond
the scope of this effort is obviously required.
We do, however, conclude that the changes that would be needed in energy production,
distribution, and use in Ontario (as well as the management of natural resources such as forests
that provide feedstock for energy processes) are very significant. In the electricity sector, for
instance, we assume that the economic potential of cogeneration and demand reducing mea-
sures that can be achieved are roughly double what Ontario Hydro presently states is feasible.
106
The Coalition believes, however, that the provincial government has at its disposal a
varieiv of regulators and market tools to encourage significant reductions in CO: in the resi-
dential, commercial, transportation, and industrial sectors. New tools will also be needed,
however especially in the regulation of operation of electric and gas utilities and in the imple-
mentation ofTprovincial industrial strategy to capitalize on its global warming strategy for the
Supposes of technological and economic advancement. With all of these tools at its disposal and
sufficient political will and leadership, the province should be able to undertake an effective ef-
fort to abate future emissions of CO;, while opening important new technological and eco-
nomic advancement for the people and industries of Ontario.
Here are the key policy initiatives the Coalition believes are necessary to credibly launch
a provincial global warming during the next few years:
• The Ontario Energy Board (OEB). The Premier's Office gives the OEB regula-
tor scope and leadership to require provincial electric and gas utilities to adopt a least
cost planning mandate and more authority over Ontario Hydros and municipal electric
utilities rates which would give a significant push to a host of energy efficiency mea-
sures that cost less to society than the provision of new supply.
. Promotion of Cogeneration. The Premier's Office requests Ontario Hydro to fur-
ther increase the buy-back rate to accelerate the development of cogeneration projects,
and the OEB establishes a new regulatory framework for gas utilities that encourages
them to actively develop local cogeneration projects.
• The Provincial Building Code. The Ministry of Housing reviews and revises the
provincial building code on a biennial, as opposed to five-year, basis. In the residentia
sector the R2000 standard is adopted for all new housing, while in the commercial
sector the ASHRAE 90.1 code plus more stringent lighting standards along the line ot
those contained in the California energy code would be adopted.
. The Enerev Efficiency Act. The Ministry of Energy raises the profile of the Act,
expands its scope to include a variety of residennal products, such as windows, furnace
fans, etc., not now covered, as well as commercial and industrial equipment, and adds
the staff necessary to do the job.
. Gas Guzzler/Sipper Rebate Program. The Ministry of Treasury and Economics
modifies the recently strengthened provincial gas guzzler tax. changing it into an envi-
ronmental, as opposed to a revenue producing tax, that aims to provide rebates to peo-
ple who purchase fuel efficient automobiles, with the tax and rebates scaled to the fuel
efficiency of the motor vehicle.
. Move Towards Ethanol. The Ministry of Agriculture and Food working with the
Ministry of the Environment and the farming community, seek to develop the regula-
tory basis for promoting in an environmentally responsible strategy for using Ontano-
cultivated ethanol as an octane enhancer in gasoline.
. Urban Boundary Zone and Public Transit. The Ministry of Municipal Affairs,
working with the Ministry of the Environment, develop a province- wide initiative com-
parable to Oregon's that seeks to better manage the growth of urban centres so as to in-
crease densities and control the conversion of valuable farm ^™*™™Jl^r
urban use. In addition, the Ministry' of Transportation works with Mcto and ^ ignbor
ing governments to develop and implement a plan to double public transit ndership in
the Greater Toronto Area by 2005.
107
• Cap on Industrial C02Emissions. The Ministry of the Environment in consulta-
tion with industry review the various options available and select an appropriate regula-
tory approach to stabilise CO; emissions from the largest 50-100 industrial emitters
1988 levels by 2005. The Ministry of Energy, in consultation with Ontario Hydro,
other appropriate agencies, and particular energy-intensive industries such as iron and
steel develop plans for technical and financial assistance to facilitate the capacity of such
industries to incorporate energy efficiency and cogeneration technologies to reduce their
energy use, as well as their factor costs associated with such use.
• Development of an Industrial Strategy. The Ministry of Industry, Trade, and
technology, working with the Ministry of Energy, Ontario Hydro and the gas utilities,
seek to formulate an energy efficiency and renewable energy industrial strategy for
Ontario that would make the province an exciting and rewarding place for private ven-
ture capitalists to invest in new energy technologies and industries. An initial opportu-
nity worth exploring would be to develop a strategy to gain as much leverage from the
venture capital fund that British Gas will be setting up under its agreement with the
provincial government as pan of the condition of sale of Consumers Gas.
We believe, in conclusion, that adoption of the Toronto target as a provincial planning
goal can be an instrumental tool of public policy that establishes a framework in which sectoral
energy intensity and fuel mix targets and specific strategies can be formulated, relative progress
can be measured over the years, and political leverage can be gained in national and interna-
tional negotiations. More importantly, such a commitment would put the province in a league
with a small, but fast growing international community of governments that recognizes the po-
tentially vast implications of global climate change and are willing to step forward and do
something about it.
ENDNOTES
970ffice of Technologv Assessment, Changing by Degrees: Steps to Reduce Greenhouse
Gases, Washington, DC. (February 1991)
98Jack Gibbons and Marcia Valiante, Carbon Taxes and Tradeable Carbon Quotas: A Least
Cost Strategy to Reduce Ontario's Carbon Dioxide Emissions, Canadian Institute for
Environmental Law and Policy, Toronto (January 1991)
"Ken Zweibel, Harnessing Solar Power: The Photovoltaics Challenge, Plennum Press, New
York (1990)
100"David Swinbanks, Japanese Science Budget: A Darker Shade of Green, Nature, Vol. 346,
August 30, 1990, p. 783
101Noboru Itoh, New tricks for an old power source— The Japanese mount a major effort to
make fuel cells commercially viable, IEEE Spectrum, September 1990, p. 40
102LTC, Toshiba, and IFC Announce Production of200-k\V Fuel Cell Powerplants, Fuel Cell
News, Vol, Vn, No. 2, June, 1990
108
APPENDIX A— MINISTRY OF ENERGY DATA
Table A-1: Ontario Energy Use, 1988 (PJ)
Natural
Wood
Sub-
Elec-
Secondary energy
on
Gas
NGLs
Coal
Waste
total
tricity
Total
Residential
64
244
11
_
19
338
147
485
Commeraal
43
151
3
-
-
197
137
334
Industnal
95
349
6
205
71
726
177
903
Transportation
606
1
10
-
-
617
1
619
Non-energy
174
32
30
-
-
235
-
235
SUB-TOTAL
982
776
61
205
90
2,114
462
2,576
Own uses/losses
87
60
-
-
-
147
41
TOTAL 1
,069
836
61
205
90
2,361
503
2,576
Primary energy
Eledncity:
Fossil
8
9
-
347
-
364
Hydro
-
-
-
-
-
382
Nuclear
-
-
-
-
-
705
SUB-TOTAL
1,450
TOTAL PRIMARY 1
,077
845
61
552
90
3,711
Table A-2: Ontario C02 Emissions, 1988 (Mt)
Natural
Wood
% of
End-use:
OH
Gas
NGLs
Coal
Waste
Total
total
Residential
4.7
12.1
.7
-
16
19.0
12%
Commercial
3.2
7.5
.2
—
-
10.9
7%
Industrial
7.1
17.3
.4
18.2
7.1
50.1
30%
Transportation
41.8
.03
.6
-
-
42.4
26%
Non-energy
-
.8
-
-
-
.8
.5%
Own uses/losses
5.8
3.0
.02
—
-
8.9
5%
SUB-TOTAL
62.5
40.8
1.9
18.2
8.7
132.0
80%
Electricity
.6
.5
-
31.3
-
32.3
20%
TOTAL C02
63.1
41.2
1.9
49.5
8.7
164.3
1 00%
109
Table A-3: Ontario Energy Use, 2005 (PJ)
Natural
Wood/
Sub-
Elec-
Secondary energy
Oil
Gas
NGLs
Coal
Waste
total
tricity
Total
Residential
45
275
12
_
21
352
202
554
Commercial
31
206
4
-
-
241
213
454
Industrial
131
522
10
323
99
1,085
300
1,385
Transportation
782
5
12
-
-
799
2
801
Non-energy
245
70
46
-
-
360
-
235
SUB-TOTAL 1
,234
1,078
84
323
120
2.838
716
3,194
Own uses/losses
93
88
1
-
-
182
63
TOTAL 1
,327
1,156
85
323
120
3,020
779
3,799
Primary energy
Electricity:
Fossil
2
90
-
216
2
309
Hydro
-
-
-
-
-
436
Nuclear
-
-
-
-
-
1,234
Purchases
-
-
-
-
-
74
SUB-TOTAL 1
,077
845
61
552
90
2,052
TOTAL PRIMARY 1
,329
1,255
85
540
121
5,072
Table A-4: Ontario C02 Emissions, 2005 (Mt)
Natural
End-use: Oil Gas NGLs
Residential 3.3 13.6 .7
Commercial 2.3 10.2 .2
Industnal 9.7 25.9 .6
Transportation 53.9 .3 7
Non-energy - 1.7
Own uses/losses 6.3 4.4 .04
SUB-TOTAL 73.5 56.2 2.3
Electncity .1 4.5
TOTAL C02 75.6 60.6 2.3
Coal
28.7
28.7
19.5
48.2
Wood'
Waste
1.7
9.9
116
11.6
Total
19.3
12.8
74.9
54
1
10
174
24.1
198 4
% ot
total
10%
7%
38%
28%
.1%
5%
88%
12%
100%
1 10
APPENDIX B— RESIDENTIAL SECTOR
Potential CO; reductions in the residential sector are estimated using end-use and fuel
share data for single-familv residences from Ontario Hydro's Market Reference Dataset,
Energv Management Branch (February 1990), which is shown in Table B-l, and the report.
Commercial Sector End-Use Forecast (December 1990), which includes estimates of commer-
cial floor space (Table C-2) and energv use by sub-sector and end-use (Table C-4). Ontario
Hvdro classifies multi-familv residential space as commercial space in its record keeping, and
references are to be found in Appendix C— Commercial Sector. The projection of the number
of residential units added from 1989-2005, however, are Ministry of Energy estimates, and
they are given in Table B-9.
Ontario Hvdro's estimates of secondary energy end-use in single and multi-family resi-
dential buildings in 1988, 472 PJ, are approximate to the Ministry's estimate of 484 PJ. The
Ontario Hvdro data is used here, however, because it permits finer resolution in the application
of CO-> reduction measures, particularly to different appliance categories. It is assumed that the
reduction estimates derived from analysis of the Ontario Hydro data are applicable to the
Ministry's data.
Measures applied to multi-family residential buildings are described in Appendix B.
The economically achievable measures assumed to reduce C02 emissions in single-family resi-
dences include the following:
RETROFIT TARGETS (2005) FOR SINGLE-FAMILY RESIDENCES:
Efficiency scenario:
•Improvements in thermal envelope and furnaces reduce heaung
energy in 70 percent of the building stock by 25%
•Reducuon in cooling energy in all buildings by 25%
•Significant penetration of compact fluorescenis reduces lighting energy by 60%
•Improvement in average efficiency of water heater stock of 25c
•Improvement in average efficiency of refrigerator stock of 40<8
•Improvement in average efficiency of clothes dryer stock of 25%
•Improvement in average efficiency of cooking appliance stock of 20%
•Electric heat pumps average 200 percent efficiency in the following
percentage of homes that presently have heat pumps 75%
Fuel switching scenario:
•Switch from oil to gas space and water heating by 50%
•Switch from electricity to gas space and water heating by 20%
Renewable scenario:
•Retrofit domesuc solar water healing in 30 percent of building stock, saves 2~ PJ
•Retrofit passive solar heating technologies, such as atuc heat return,
in 10 percent of building stock, saves *6 PJ
ENERGY INTENSITY TARGET FOR NEW RESIDENTIAL:
It is assumed that the average energy intensity of new residences, as a result of bien-
nial modification of the provincial building code, declines gradually to 40 GJ for a
typical 2.000 sq. ft. home (equivalent to the energy rating of the Advanced House)
from the present code standard of about 125 GJ for an equivalent sized house. The
same proportional decline is applied to row houses. The decline occurs in the follow-
ing steps (per unit of housing):
1989-90 1991-92 1993-95 1996-99 2000+
Detached + semi 150 GJ 125 1001 60 402
Row 110GJ 90 70 45 30
'R2000; Advanced House
1 1 1
The average energy intensity of new multi-family residences declines 50 percent from
the average level of the 1988 multi-family building stock by 2005. Hence, apartment
stock constructed 1988-2005 would average .4 GJ/m2 or 8 kVVh/ft2 in 2005. Details
are provided on new multi-family residenual buildings in Appendix B tables. The in-
cremental cost of building the Advanced House today is S20.000; this cost would be
expected to decline as some of the components built especially for the House, such as
the integrated mechanical system, reach commercialization. One caveat is in order.
These projections do not assume increasing use of electric appliances in the future, a
continuing trend that will tend to increase home energy use in the future. On the
other hand, the calculations are conservatively based on a 2,000 square foot house,
somewhat larger than what is likely to be the average size of new homes over the
next 15 years, so they probably lend to overestimate future energy use.
The results of the measures on C02 emissions spreadsheet analysis are shown for exist-
ing buildings in Tables B-5-to-B-8, and for single-family residences in Table B-10. As a result
of the measures described above, C02 emissions are reduced by 34 percent from 1988 levels.
The results are summarized in the following table:
Table B-1: Summary of C02
Reduction
Measures In Residential Sector
Total
Total
Scenario
energy
energy
applied
use
C02
PJ
Mt
Base (1988):
Single-family
42312
26.32
Multi-family
49.59
2.95
TOTAL 1988
472.71
29.27
Scenanos for existing:
Single-family
(i) efficiency
332.19
15.81
(ii) fuel switch
332.19
15.49
(iii) renewable
294.01
14.61
Multi-family
(i) efficiency
38.06
1.57
(ii) fuel swrtch
38.06
1.56
(iii) renewable
38.06
1.38
Sub-Total existing
(i) efficiency
370.25
17.38
(ii) fuel switch
370.25
17.05
(iii) renewable
332.07
15 99
New Residential:
Single-family
64.08
3.00
Multi-famly
9.70
0.31
Sub-total new
73.78
3.31
TOTAL 2005
405.85
19.29
Most of the reduction indicated is due to: (i) revisions in the building code to make new build-
ings progressively more efficient; (ii) retrofit measures, such as air sealing, insulation, and ef-
ficiency furnaces to reduce heating requirements of the existing residential building stock, and
(iii) greater appliance efficiency. The changes in electricity use and emissions from such use are
summarized in Table B-1 2.
1 1 2
Table B-2: Residential Energy Consumption (base case), 1988-2005
Single family Multl- family Total Total
1988 2005 1988 2005 1988 2005
Space heating 274.21 295.08 27.95 38.94 302.16 334.03
electric 39 02 53.33 6 13 8.54 45 15 6187
gas 161.07 181 29 2051 28 58 181 59 209 87
Oil 52.82 37 47 1.31 182 54 13 39 29
solar 0 00 0.00 0.00 0.00 0.00 0 00
other 21 29 22.99 0 00 0.00 21.29 22 99
Water heating 72.19 86.04 7.37 10.27 79.56 96.31
electric 23 48 32 09 2.42 3.37 25 90 35 46
gas 46.60 52 45 4.89 6.81 51.48 59.26
Oil 2.11 1.50 0.07 0.09 2.18 1.59
solar 0.00 0.00 0.00 0.00 0.00 0.00
Cooking 12.57 15.96 1.74 2.42 14.31 18.38
electric 8.05 11.00 1.71 2.38 9.76 13.38
gas 1.65 1.85 0.03 0.04 1.67 1.89
other 2.88 3.11 0.00 0.00 2.88 3.11
Clothes drying 8.42 11.26 0.00 0.00 8.42 11.26
electric 7.38 1009 0.00 0.00 7.38 10.09
gas 1.04 1.18 0.00 0.00 1.04 1.18
Appliances 37.81 51.68 7.81 10.88 45.62 62.56
air conditioning 7.43 10.16 1.81 2.52 9.24 12.68
air humidify 0.36 0.50 0.39 0.54 0.75 1.03
refrigeration 16 59 22.67 2.58 3.60 19.17 26.26
lighting 8.26 11.29 3.03 4.23 11.30 15.52
television 5.17 7.07 0.00 0.00 5.17 7.07
Miscellaneous 17.91 23.65 4.72 6.58 22.63 30.23
electric 15.03 20.54 4.64 6.46 19.66 27.00
other 2.88 3.11 0.09 0.12 2.97 3.23
Totals 423.12 483.68 49.59 69.09 472.71 552.77
electricity 130.77 178.73 22.70 31.63 153.47 210.36
gas 210.36 236.77 25.43 35 43 235 79 272.19
oil 54.94 38.97 1.38 1.92 56.31 40.88
msc. 27.05 29.21 0.09 0.12 2714 29.33
Note: Includes single-family residences built. 1989-2005
1 13
Table B-3: Residential Energy Consumption (efficiency), 1988-2005
Single
family
Multl-
family
Total
Total
1988
2005
1988
2005
1988
2005
Space heating
274.21
219.40
27.95
31.78
302.16
251 .17
electric
39.02
25.36
6.13
6.40
45.15
31.77
gas
161.07
132.89
20.51
23.95
181.59
156 84
oil
52.82
43.58
1.31
1.42
54 13
45.00
solar
0.00
0.00
0.00
000
0.00
0.00
other
21.29
17.57
0.00
0.00
21.29
17.57
Water heating
72.19
54.14
7.37
8.38
79.56
62.52
electric
23.48
17.61
2.42
2.56
25.90
20 17
gas
46.60
34.95
4.89
5.75
51 48
40.70
oil
2.11
1.58
0.07
0.07
2.18
1.65
solar
0.00
0.00
0.00
0.00
0.00
0.00
Cooking
12.57
10.06
1.74
2.08
14.31
12.14
electric
8.05
6 44
1.71
1.84
9.76
8.28
gas
1.65
1.32
0.03
0.23
1.67
1.55
other
2.88
2.30
0.00
0.00
2.88
2.30
Clothes drying
8.42
6.32
0.00
0.00
8.42
6.32
electric
7.38
5.54
0.00
0.00
7.38
5.54
gas
1.04
0.78
0.00
0.00
1.04
0.78
Appliances
37.81
24.36
7.81
9.34
45.62
33.70
air conditioning
7.43
5.58
1.81
2.16
9.24
7.73
air humidify
0.36
0.36
0.39
0.46
0.75
0.82
refrigeration
16.59
9.95
2.58
3 09
19.17
13.04
lighting
8.26
3.30
3.03
3.63
11.30
6.93
television
5.17
5 17
0.00
0.00
5.17
5.17
Miscellaneous
17.91
17.91
4.72
5.65
22.63
23.56
electric
15.03
15 03
4.64
5 55
19.66
20 57
other
2.88
2.88
0.09
0.11
2.97
2.99
Totals
423.12
332.19
49.59
57.22
472.71
389.41
electricity
130.77
94.34
22.70
25.69
153.47
120.03
gas
210.36
169.93
25.43
29.94
235.79
199 87
oil
54.94
45.16
1 38
1.49
56.31
46 65
misc.
27.05
22.75
0.09
0 11
27 14
22.86
Note: Does not include single-family residences built, 1989-2005
l l 4
Table B-4: Residential Energy (luel sw
Itch), 1988-2005
Single
family
Multl-
family
Total
Total
1 988
2005
1988
2005
1988
2005
Space heating
274.21
219.40
27.95
31.78
302.16
251 .17
electric
39.02
20.29
6 13
6 40
45.15
26.69
gas
161.07
159.75
20.51
23.95
181 59
183.70
oi
52 82
21.79
1.31
1.42
54.13
23.21
solar
0.00
0.00
0.00
0.00
0.00
0.00
other
21.29
17.57
0.00
0.00
21.29
17.57
Water heating
72.19
54.1 4
7.37
8.38
79.56
62.52
electric
23.48
14.09
2.42
2.56
25.90
16.65
gas
46.60
39.26
4 89
5.75
51.48
45.01
Oil
2.11
0.79
0.07
0.07
2.18
0.86
solar
0.00
0.00
0.00
0.00
0.00
0.00
Cooking
12.57
10.06
1 .74
2.08
14.31
12.14
electric
8.05
6.44
1.71
1.84
9.76
8.28
gas
1.65
1.32
0.03
0.23
1.67
1.55
other
2.88
2.30
0.00
0.00
2.88
2.30
Clothes drying
8.42
6.32
0.00
0.00
8.42
6.32
electric
7.38
5.54
0.00
0.00
7.38
5.54
gas
1.04
0.78
0.00
0.00
1.04
0.78
Appliances
37.81
24.36
7.81
9.34
45.62
33.70
air conditioning
7.43
5.58
1.81
2.16
9.24
7.73
air hurridrfy
0.36
0.36
0.39
0.46
0.75
0.82
refrigeration
16.59
995
2.58
3.09
19.17
13.04
lighting
8.26
3.30
3.03
3.63
11.30
6.93
television
5.17
5.17
0.00
0.00
5.17
5.17
Miscellaneous
17.91
17.91
4.72
5.65
22.63
23.56
electric
15.03
15.03
4.64
5 55
19.66
20.57
other
2.88
2.88
0.09
0.11
2.97
2.99
Totals
423.12
332.19
49.59
57.22
472.71
389.41
electricity
130.77
85.74
22.70
25.69
153.47
111.44
gas
210.36
201.11
25.43
29 94
235.79
231.05
Oil
54.94
22 58
1 .38
1.49
56.31
24.07
misc.
27.05
22 75
0.09
0.11
27.14
22.86
Note: Does not include single-family residences built. 1989-2005
1 1 5
Table B-5 Residential Energy (renewable), 1988-2005
Single
family
Multl-
family
Total
Total
1988
2005
1988
2005
1988
2005
Space heating
274.21
219.40
27.95
31.78
302.16
251.17
electric
39.02
18.26
6.13
6 40
45.15
24 67
gas
161.07
143.77
20.51
23.95
181.59
167.73
Oil
52.82
19.61
1.31
1.42
54.13
21.03
solar
0.00
21.94
0.00
0.00
0.00
21.94
other
21.29
15.81
0.00
0.00
21.29
15.81
Water heating
72.19
54.1 4
7.37
8.38
79.56
62.52
electric
23.48
9.86
2.42
2 56
25.90
12.42
gas
46.60
27.48
4.89
5.75
51.48
33.23
Oil
2.11
0.55
0.07
0.07
2 18
0.62
solar
0.00
16.24
0.00
0 00
0.00
16.24
Cooking
12.57
10.06
1.74
2.08
14.31
12.14
electric
8.05
6.44
1.71
1.84
9.76
8.28
gas
1.65
1.32
0.03
0.23
1.67
1.55
other
2.88
2.30
0.00
0.00
2.88
2.30
Clothes drying
8.42
6.32
0.00
0.00
8.42
6.32
electric
7.38
5.54
0.00
0.00
7.38
5.54
gas
1.04
0.78
0.00
0.00
1.04
0.78
Appliances
37.81
24.36
7.81
9.34
45.62
33.70
air conditioning
7.43
5.58
1.81
2.16
9 24
7.73
air humidify
0.36
0.36
0.39
0.46
0.75
0.82
refrigeration
16.59
9.95
2.58
3.09
19.17
13.04
lighting
8.26
3.30
3.03
3 63
11.30
6.93
television
5.17
5.17
0.00
0.00
5.17
5.17
Miscellaneous
17.91
17.91
4.72
5.65
22.63
23.56
electric
15.03
15.03
4.64
5.55
19.66
20.57
other
2.88
2.88
0.09
011
2.97
2.99
Totals
423.12
294.01
49.59
57.22
472.71
351.23
electricity
130.77
79.49
22.70
25.69
153.47
105.18
gas
210.36
173.36
25 43
29.94
235.79
203 29
oil
54.94
20.17
1.38
1.49
56 31
21.65
misc.
27.05
20.99
0.09
0.11
27.14
21.10
solar
0.00
38.18
0.00
0 00
0.00
38 18
Note: Does not include single-family residences built, 1989-2005
1 16
Table B-6: Residential C02 Emissions (base), 1988-2005
Single
family
Multl-
family
Total
Total
1988
2005
1988
2005
1988
2005
Space heating
16.12
14.72
1.54
1 .76
17.66
16.48
electnc
2.73
1.33
0 43
0 21
3.15
1 54
gas
7.97
8.97
1.01
1.41
8.98
10.38
oi
3 86
2 74
0.10
0.13
3.96
2.87
solar
0.00
0.00
0.00
0.00
0.00
0.00
other
1.56
1.69
0.00
0 00
1.56
1.69
Water heating
4.92
3.90
0.54
0.49
5.45
4.39
electnc
1.64
0.80
0.17
0.08
1.81
0.88
gas
2.30
2.59
0.24
0.34
2 55
2.93
oil
0.15
0.11
0.00
0.01
0.16
0.12
solar
0.00
0.00
0.00
0.00
0.00
0.00
Cooking
0.82
0.40
0.1 2
0.06
0.94
0.46
electnc
0.56
0.27
0.12
0.06
0.68
0.33
gas
0.08
0.05
0.00
0.00
0.08
0.05
other
0.17
0.08
0.00
0.00
0.17
0.08
Clothes drying
0.57
0.28
0.00
0.00
0.57
0.28
electnc
0.52
0.25
0.00
0.00
0.52
0.25
gas
0.05
0.03
0.00
0.00
0.05
0.03
Appliances
2.64
1 .29
0.55
0.27
3.19
1 .56
ar conditioning
0.52
0.25
0.13
0.06
0.65
0.32
air humidify
0.03
0.01
0.03
0.01
0.05
0.03
refrigeration
1.16
0.56
0.18
0.09
1.34
0.65
lighting
0.58
0.28
0.21
0.11
0.79
0.39
television
0.36
0.18
0.00
0.00
0.36
0.18
Miscellaneous
1 .26
0.74
0.33
0.17
1 .59
0.91
electric
1.05
0.51
0.32
0.16
1.37
0.67
other
0.21
0.23
0.01
0.01
0.22
0.24
Totals
26.32
21.32
3.07
2.75
29.40
24.07
electricity
9.14
4 45
1.59
0.79
10.72
5.23
gas
10.40
11.64
1.26
1.75
11.66
13.39
oil
4.02
2.85
0.10
0.14
4.12
2.99
misc.
1.95
1.99
0.01
0.01
1.95
2.00
Note: Does not include single-family residences built, 1989-2005
1 17
Table B-7 Residential C02 Emissions (efficiency), 1988-2005
Single family Multl- family Total Total
1988 2005 1988 2005 1988 2005
Space heating 16.12 11.68 1.54 1.32 17.66 13.00
electric 2.73 0.63 0.43 0.14 3.15 0.78
gas 7.97 6.57 1.01 108 8.98 7.66
Oil 3.86 3.19 010 0 09 3.96 3.28
solar 0.00 0.00 0.00 0.00 0.00 0.00
Other 1.56 1.29 0.00 0.00 1.56 1.29
Water heating 4.92 2.53 0.54 0.34 5.45 2.87
electric 1.64 0.44 0.1 7 0.06 1.81 0.49
gas 2.30 1.73 0.24 0.25 2.55 1.98
oil 0.15 0.12 0.00 0.00 0.16 0.12
solar 0 00 0.00 0.00 0.00 0.00 0.00
Cooking 0.82 0.25 0.12 0.02 0.94 0.27
electric 0.56 0.16 012 0.02 0.68 0.18
gas 0.08 0.03 0.00 0.01 0.08 0.04
other 0.17 0.06 0.00 0.00 0.17 0.06
Clothes drying 0.57 0.16 0.00 0.00 0.57 0.16
electric 0 52 0.14 0.00 0.00 0 52 0.14
gas 0.05 0 02 0.00 0.00 0.05 0.02
Appliances 2.64 0.61 0.55 0.15 3.19 0.75
air conditioning 0.52 0.14 0.13 0.05 0.65 0.19
air hurridify 0.03 0.01 0.03 0.01 0.05 0.02
refrigeration 1.16 0.25 0.18 0.03 1.34 0.28
lighting 0.58 0.08 0.21 0.06 0.79 0.14
television 0.36 0.13 0.00 0.00 0.36 013
Miscellaneous 1.26 0.59 0.33 0.07 1.59 0.65
electric 1.05 0.37 0.32 0 06 1.37 0.43
other 0.21 0.21 0.01 0.01 0.22 0.22
Totals 26.32 15.81 3.07 1.89 29.40 17.70
electricity 9 14 2.35 1.59 0.42 10.72 2 77
gas 1040 8.35 1.26 1.34 11.66 9.70
Oil 4.02 3.30 0.10 0.10 412 3.40
msc. 1.95 156 0.01 0.01 1.95 157
Note: Does not include single-family residences built. 1989-2005
1 1 8
Table B-8: Residential C02 Emissions (fuel switch), 1988-2005
Single
family
Multl-
family
Total
Total
1988
2005
1988
2005
1988
2005
Space heating
16.1 2
1 1 .29
1.54
1 .31
17.66
12.60
electric
2 73
0.50
0.43
0.14
3 15
0.64
gas
7.97
7.90
1.01
1.13
8 98
9 03
oil
3.86
1.59
0.10
0.05
3.96
1 64
solar
0.00
0.00
0.00
0.00
0 00
0 00
other
1.56
1.29
0.00
0.00
1.56
1 29
Water heating
4.92
2.60
0.54
0.34
5.45
2.94
electric
1 64
0.35
0.17
0.05
1.81
0.40
gas
2.30
1.94
0.24
0 26
2 55
2 20
oi
0.15
0.06
0.00
0.00
0.16
0.06
solar
0.00
0.00
0.00
0.00
0.00
0 00
Cooking
0.82
0.25
0.12
0.02
0.94
0.27
electric
0.56
0.16
0.12
0.02
0.68
0.18
gas
0.08
0.03
0.00
0.01
0.08
0.04
other
0 17
0.06
0.00
0.00
0.17
0.06
Clothes drying
0.57
0.16
0.00
0.00
0.57
0.16
electric
0.52
0.14
0.00
0.00
0.52
0.14
gas
0.05
0.02
0.00
0.00
0.05
0.02
Appliances
2.64
0.61
0.55
0.15
3.19
0.75
air conditioning
0.52
0.14
0.13
0.05
0.65
0 19
air humidify
0.03
0.01
0.03
0.01
0.05
0.02
refrigeration
1.16
0.25
0.18
0 03
1.34
0.28
lighting
0.58
0.08
0.21
0.06
0 79
0.14
television
0.36
0 13
0.00
0.00
0.36
0.13
Miscellaneous
1.26
0.59
0.33
0.07
1 .59
0.65
electric
1.05
0.37
0.32
0.06
1.37
0 43
other
0.21
0.21
0.01
0.01
0.22
0.22
Totals
26.32
15.49
3.07
1 .89
29.40
17.38
electricity
9.14
2.13
1.59
0.41
10.72
2.55
gas
10.40
9.90
1.26
1.39
11.66
11.29
oil
4.02
1.65
0.10
0.05
4.12
1 70
rnsc.
1.95
1.56
0.01
0.01
1.95
1.57
Note: Does not include single-family residences built, 1989-2005
1 19
Table B-9: Residential C02
Emissions
(renewable), 1988-2005
Single
family
Multl-
family
Total
Total
1988
2005
1988
2005
1988
2005
Space heating
16.12
10.71
1.54
1.27
17.66
1 1 .98
electric
2.73
0.45
0.43
0.13
3.15
0.58
gas
7.97
7.11
1.01
1.05
8.98
8 16
oil
386
1.43
0.10
0.05
3.96
1.48
solar
0.00
0.55
0.00
0.05
0.00
0.60
other
1.56
1.16
0.00
0.00
1.56
1.16
Water heating
4.92
2.30
0.54
0.31
5.45
2.61
electric
1.64
0.25
0.17
0.04
1.81
0.29
gas
2.30
1.36
0.24
0.20
2.55
1.56
oil
0.15
0.04
0.00
0.00
0.16
0.04
solar
0.00
0.40
0.00
0.04
0.00
0.45
Cooking
0.82
0.25
0.1 2
0.02
0.94
0.27
electric
0.56
0.16
0.12
0.02
0.68
0.18
gas
0.08
0.03
0.00
0.01
0.08
0.04
other
0.17
0.06
0.00
0.00
0.17
0.06
Clothes drying
0.57
0.16
0.00
0.00
0.57
0.16
electric
0.52
0.14
0.00
0.00
0.52
0.14
gas
0.05
0.02
0.00
0.00
0.05
0.02
Appliances
2.64
0.61
0.55
0.13
3.19
0.74
air conditioning
0.52
0.14
0.13
0.03
0.65
0.17
air humidity
0.03
0.01
0.03
0 01
0.05
0.02
refrigeration
1.16
0 25
0.18
0.03
1.34
0.28
lighting
0.58
0.08
0.21
0.06
0.79
0.14
television
0.36
0.13
0.00
0.00
0.36
0.13
Miscellaneous
1.26
0.59
0.33
0.07
1 .59
0.65
electric
1.05
0.37
0.32
0.06
1.37
0.43
other
0.21
0.21
0.01
0.01
0.22
0.22
Totals
26.32
14.61
3.07
1 .80
29.40
16.41
electricity
9.14
1.98
1.59
0 37
10.72
2.35
gas
10.40
8.52
1.26
1.25
11.66
9.78
oil
4.02
1.47
0.10
0.05
4.12
1 52
misc.
1.95
1.43
0.01
0.01
1.95
1.44
Note: Does not include single-family residences built. 1989-2005
120
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121
Table B-12: Summary of Changes In Residential Electricity Use,
1988-2005
1988 2005 1988 2005
Energy Energy C02 C02
PJ
PJ
Mt
Mt
Existing buildings:
153.47
91.52
10 72
10.72
Single-family
130.77
79.49
9.14
9.14
Multi-family
22.70
12.03
1.59
1.59
New buildings:
n/a
22.42
0.00
0.56
Single-family
n/a
19.43
n/a
0.48
Multi-family
n/a
2.99
n/a
0.07
Sub-totals
Single-family
130.77
98.92
9.14
9.62
Multi-family
22.70
15.03
1.59
1.66
TOTAL
153.47
113.94
10.72
11.28
122
APPENDIX C— COMMERCIAL SECTOR
Potential CO; reductions are estimated using data from a recent Ontario Hydro report,
1990 Commercial Sector End-Use Forecast (December 1990), which includes estimates of
floor space (Table C-2) and energy use by sub-sector and end-use (Table C-4). Annual growth
rates of individual sub-sectors, however, are Ministry of Energy estimates, and they are given
in Table C-l which consolidates the Ontario Hvdro data for floor space and energy use and
shows energy intensities. Fuel shares from the Ministry's data are also used for the 1988
building stock (Table C-3).
Ontario Hvdro's estimates of energy use in the commercial sector differ from the
Ministry's estimates, largely due to a large "other" category in the Ministry's database. The
Ontano'Hvdro data is used here because it permits finer resolution in the application of CO; re-
duction measures. It is assumed that the reduction estimates derived from analysis of the
Ontario Hvdro data are applicable to the Ministry's data, though it is recognized this simplify-
ing assumption may overlook subtleties connected with energy use in the Ministry s ' other
category.
The economically achievable measures assumed to reduce CO2 emissions include the
following:
RETROFIT TARGETS FOR EXISTING BUILDINGS:
Efficiency scenario:
•Improvements in thermal envelope and furnaces reduce heaung
energy in 50 percent of the building stock by 20%
•Reducuon in cooling energy in 50 percent of the building stock by 20%
•Level Three lighting retrofits reduce electricity loads in
75 percent of building stock by ™%
•Reducuon in venulauon energy by retrofitting efficient
motors in 50 percent of building stock by 259
•Reducuon in water heaung in 50 percent of building stock by -5%
•Reducuon in cooking energy in 50 percent of building stock by 20%
•Reduction in plug load energy in 100 percent of buildings by 20%
Fuel switching scenario:
•Switch from oil to gas space and water heating by 50^
•Switch from electricity to gas space and water heating by 5%
Renewable scenario:
•Retrofit commercial solar water heaung - PJ
•Retrofit passive solar heaung technologies,
such as advanced performance windows * PJ
•Implement Freecool in Toronto district heaung system,
assumes operauon of 1,000 hours per annum 7 PJ
•A note about plug load: it is the fastest growing component of energy use in commercial
buddings. The U.S. Office of Technology Assessment, however, esumates that the energy
used bv of office equipment may be reduced by 80 percent over the next 1 5 years if invest-
ments in new technology are made, with 65 percent of the savings from new technology
(such as the incorporauon of laptop computer technologies into desk computers)and a
40 percent reducuon in idle time.
ENERGY INTENSITY TARGET FOR NEW BUILDINGS:
It is assumed that the average energy intensity of new buildings declines 50 percent
from the average level of the 1988 building stock, as given in Table 1. Hence, office
building stock constructed 1988-2005, for example, would average .7 GJ/m2 or 18
kWh/ft2 in 2005. Furthermore, fuel shares given in Table B 5 are assumed, with solar
assuming 30 percent of the space and water heaung loads, and electricity declining
123
from 13 percent (1988) to 5 percent of the space heating share, and from 25 percent
(1988) 10 10 percent of the water heaung share.
The results of the measures on CCK emissions spreadsheet analysis are shown for exist-
ing buildings in Tables C-7-to-C-10, and for new buildings in Table C-l 1. As a result of the
measures described above, CO2 emissions are reduced by 46 percent from 1988 levels. The re-
sults are summarized in the following table:
Table C-12: Summary of C02 Reduction
Measures In Commercial Sector
Total
Scenario energy Total
applied use C02
PJ Mt
Base (1988) 188.20 11.93
Scenarios for existing:
(i) efficiency 152.90 5.61
(ii) fuel switch 152.89 5 51
(iii) renewable 152.89 5.00
New Buildings 52.27 1.50
Total 2005 " 205.15 6.50
Much of the reduction indicated is due to the decline in electricity's share of building
energy — from 58 percent to 53 percent in existing buildings, for instance — keeping electricity
demand to a 20 percent rise (while floor space increases by 52 percent), and a lower CO;
emissions rate for electricity consumed in 2005, which is less than half the emissions rate for
1988. The changes in electricity use and emissions from such use are summarized in Table C-
13.
Use,
Table C-13: Summa
ry of Ch
anges In Commercial
Electricity
1988-2005
1988
2005
1988
2005
Energy
Energy
C02
C02
PJ
PJ
Mt
Mt
Existing buildings
95.04
80.59
8 14
2.01
New buildings
n/a
33 22
n/a
0.07
TOTAL
95.04
113.81
8.14
2.08
124
Table C-1: Energy Intensity by Category of Building,
1988
1989
1987
1988
1988
1988
2005
2005
ttoor
Annual
door
floor
1988
energy
energy
energy
energy
area
growrtfi
area
area
energy
intensity
intensity
intensity
intensity
nf
%
tit
rrf
PJ
GJ/rT?
kWh tr
GJ/m*
kWh/tr1
Education
29
0.83%
28
29
22
0.78
20
0.39
10
Elementary 'secondary
20
0 83%
19
20
14
0.73
19
0.37
9
College&'universtties
9
0 83%
9
9
8
0.89
23
0.44
1 1
Religious
6
0.50%
6
6
4
0.73
19
0.37
9
Health
8
1 .35%
8
8
12
1.50
39
0.75
19
Retail
23
2 90%
22
23
39
1.74
45
0.87
22
Ollices
35
3 20%
33
34
49
1.43
37
0.71
18
Public Service
7
2.90%
6
6
6
0.98
25
0.49
13
Accommodations
9
2.90%
9
9
18
2.03
53
1.02
25
Warehouses
30
2.90%
28
29
18
0.61
16
0.31
8
Recreation
5
2.90%
5
5
7
1.47
38
0.74
19
Miscellaneous
6
2.90%
7
7
13
1.72
44
0.86
22
Multi-residential
78
1.97%
75
76
49
0.65
17
0.32
8
Total floor space
159
2.42%
152
155
188
1.21
31
0.60
16
Note: Multi-residential is included as a separate item and is not reflected in totals.
Sources: Ontario Hydro (1989 area and 1988 energy use) and Ministry of Energy (annual
growth)
Table C-2: Estimated New Commercial Floor space,
1989-2005
1988
2005
Floor area
2005
floor
floor
added
energy
area
area
1989-2005
use
m2
m*
m2
PJ
Education
28.51
32.81
4 30
1.68
Elementary'secondary
19.50
22.44
2.94
1.08
Colleges/universities
9.01
10.37
1.36
0.60
Religious
5.93
6.45
0.52
0.19
Health
7.73
9.71
1.98
1.49
Retail
22.65
36.83
14.18
12.32
Offices
34.32
58.62
24.31
17.36
Public Service
6.34
10.30
3.96
1.94
Accommodations
8.77
14.26
5.49
5.58
Warehouses
29.18
47.44
18.26
5.60
Recreation
4.71
7.65
2.95
2 17
Miscellaneous
7.31
11.89
4.58
394
Multi-residential
76.42
106.38
29.96
9.70
Total floor space
155.44
235.96
80.52
52.27
Note: Multi-residential is included as a separate item and is not reflected in totals.
125
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130
APPENDIX D— INDUSTRIAL SECTOR
Steel industry forecasts assume a 2.1 percent annual increase in natural gas and oil, a
20 percent total increase in coal and an 80 percent total increase in electricity (before efficiency
measures). One of the pnmarv difficulties in outlining a strategy for achieving a 20 percent
reduction of 1988 level CO; emissions in 2005, is that the forecasted emissions, due to the
hieh projected rate of economic growth, appear to outweigh the opportunities for efficiency
s Projecting economic growth in the 1990s based on the experience of the late 1980s has
resulted in overstated growth in 1990 and 1991. The GDP for Canada fell 0.9 percent in 1990.
was -4.0 percent for the three month period ending February 28, 1991 and is expected to be -1
percent in 1991. Since so much of the 20 percent target is contingent upon forecasted industrial
output, it is important to consider the role of economic forecasting as it relates to CO;
production and energy demand. Different assumptions at the beginning of an economic forecast
period mav result m'radically diverging forecasts, the further the forecast is projected. The
Ministry of Energy is assuming an annual growth rate in industrial energy demand of 2.6
percent 'and an annual increase in GDP of 3 percent. The 2.1 percent average annual increase in
enerev demand for the industrial sector is based on the average annual energy increase form
1970 to 1989.
Efficiency assumptions take into consideration only the percentage of measures deemed
to be economically implementable. In addition to strict quantifiable analysis, there are
opportunities for increasing implementation rates when combined with the policy measures
described in the report. For example, increased electricity prices relative to gas prices,
incentives for companies to install cogeneration and education programmes all serve to increase
penetration of cogeneration technology, however, the effects of the measures are difficult to
quantify in the analysis.
Distinguishing an efficiency improvement factor — energy conservation that occurs
naturally" in response to prices and to available incentives — is more difficult to do in the in-
dustrial sector, where growth often results from increased utilization of existing capacity. In
other sectors, the energy characteristics of new units of housing, office buildings, or passenger
cars can be identified and enumerated more easily. Such a sophisticated analysis was beyond
the scope of this effort. Our simplified assumption that energy demand growth in the industrial
sector will approximate the historic trend, therefore, assumes some imbedded energy conser-
vation. As a result, care should be taken in reviewing the efficiency measures presented in the
industrial sector, as there is no doubt some "double-counting" among the specific measures
discussed, such as installation of energy efficient motors, and the conservation embedded in
future growth.
The following assumptions were used in the spreadsheet analysis:
Energy Growth to 2005:
• 2 1% per annum (42% total increase) for all industries with specific variations in fuel
type for steel (42% increase in oil and gas, 20% increase in coal and 80% increase in
electricity).
Fuel Shares — All Industries except steel
• The share of Heat from oil and natural gas is 90 *
• The share of Other end uses from oil and natural gas is 10 /e
• The share of Heat from coal and wood i 90%
• The share of Other end uses from coal and wood is 10%
131
Chemicals
The share of Motive power from electricity is 80%
The share of Other end uses from electricity is 13%
The share of Lighting from electricity is 7%
Iron and Steel
The share of Heat from oil and natural gas is 87%
The share of Other end uses from oil and natural gas is 13%
The share of Heat from coal is 87%
The share of Other end uses from coal is 13%
The share of Motive power from electricity is 76%
The share of Other end uses from electricity is 16%
The share of Lighting from electricity is 8%
Cement and Other
The share of Motive power from electricity is 76%
The share of Other end uses from electricity is 16%
The share of Lighting from electricity is 8%
Pulp and Paper
The share of Motive power from electricity is 95%
The share of Other end uses from electricity is 0%
The share of Lighting from electricity is 5%
Efficiency Assumptions
Increased use of heat recovery reduces all non-coal heat by
25% at 70% penetration total savings is 17.5%
Heat recovery in steel industry is further developed, therefore
remaining savings in steel industry is estimated to be 10%
All motive power improvements (high efficiency motors,
variable drives, proper sizing, etc) improve efficiency by 20%
with a 70% penetration rate resulting in a total
motive energy reduction of 14%
• Housekeeping measures, including insulation, process
changes PINCH Technology and general efficiency awareness
can provide a savings of 10%-40%. For the analysis the most
conservative estimate is used with a penetration rate of 70%,
therefore the savings applied to all energy is 7%
A 65% improvement in lighting efficiency is assumed with a
70% penetration rate, resulting in a total savings in lighting energy of 45.5%
• A combination of heat recovery and fuel substitution
(heat from waste) results in a savings of coal use in the
cement industry, assuming 70% penetration of 10.5
Fuel Switching Assumptions
N.B. COGENERATION ASSUMPTIONS ARE CONTAINED IN ELECTRICITY
ANALYSIS, NOT INDUSTRIAL ANALYSIS.
• The use of steam and gas turbine cogeneration to produce electricity
and heat can provide 65 PJ of industrial electricity using the economic potential of the
Acres report. This would result in an increase in
natural gas consumption in the chemicals sub-sector of 4591
and an average increase in natural gas across all other sectors of 20%
with the exception of pulp and paper where wood waste is
132
used for steam turbine cogenerauon.
• Cogeneranon creates a savings in utility-produced electricity of 35%
Increased use of coal injection will reduce CO; in the steel industry by 5%
Renewable Resource Assumptions
By implementing sustainable forestry management practices it is assumed that all CO;
emitted from the burning of wood and wood waste can be offset, resulting in a
reduction in wood waste CO; of 100 percent. This assumes that the wood-related CO;
emissions from this industry in 1988 reported by the Ministry of Energy derived from
unsustainable forestry management practices. Some natural regeneration and
silviculture does presendy take place, of course, so the reduction from this measure is
somewhat overstated. Given the lack of data on biomass regeneration, however, we
adopted the simplifying assumption.
Iron and Steel Industry
With respect to the iron and steel industry, the forecasted energy demand is projected to
be 333 PJ in 2005, before additional conservation measures are applied (a 30 percent increase
as opposed to a 50 percent increase.) This assumption is based on the general economic
outlook for Ontario's steel industry, including; a longer than expected turnaround time for the
economy, increasing foreign imports, increased substitution and generally a more bearish
projection for demand of Ontario steel. Information in Table le is computed using data directly
from Table 2d, therefore numbers between Tables Id and le do not correlate for the steel
industry.
Notes on Coke Oven Gas Emissions
It takes one tonne of coal to produce .75 tonne of coke.
340 m3 of coke oven gas are produced for every tonne of coal burned.
0.4 m3 of CO; is formed for every 1 m3 of coke oven gas burned.
100 percent of coke oven gas is burned.
Approximately 5,500,000 tonnes of coal were burned to make coke in Ontario in 1988.
Therefore, 1.87 trillion m3 of coke oven gas was created and 748 million m3 of CO;
were formed by coke ovens in Ontario.
Assuming 50 kg CO: /GJ for coke oven gas and .01816 GJ/m3 coke oven
gas, therefore: 0.9 kg CO; /m3 or .0009 tonnes/m3 x 748 million m3 =
673 kilotonnes of CO; (4% of steel industry CO; )
26 percent of coke oven gas is methane, a much more potent global warming gas.
133
CALCULATIONS OF ENERGY CONSUMPTION AND C02 EMISSIONS FOR
INDUSTRIAL SECTOR IN ONTARIO
Inergy Growth Rates
I ron and Steel
Pulp/paper
Chemical
Cement
Other
Iron and Steel (by 2005, oil and gas increase 42X, coal increases 20X and electricity use increases by 80%).
1989-90
1991-95
1996-00
2001-05 Total
Average
growth of 2,
,1X (See Below)
1.42
2.10
2.10
2.10
2.10
1.42
2.10
2.10
2.10
2.10
1.42
2.10
2.10
2.10
2.10
1.42
2.10
2.10
2.10
2.10
1.42
Table 1a 1988 Base Energy Consumption Weather Corrected Actuals (Petajoules)
Oil NatGas/NGL
Coal
Wood
INDUSTRY
Chemicals
Heat
Motive
Other
Lights
Iron/Steel
Heat
Mot i ve
Other
Lights
Cement
Heat
Motive
Other
Lights
Pulp/Paper
Heat
Mot i ve
Other
Lights
Other
Heat
Motive
Other
Lights
13.60
15.30
4.20
7.00
38.60
46.30
168.70
1.80
19.50
41.10
1.80
72.20
54.20
256.40
14.20
0.00
Subtotal
Elect'y
Total
52.20
24.70
76.90
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
230.30
23.20
253.50
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
25.50
2.90
28.40
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
122.10
28.70
150.80
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
324.80
90.70
415.50
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total
94.30
384.20
204.20
72.20
754.90
170.20
925.10
134
Table 1c 2005 Energy Consumption Projections with End Uses (Petajoules)
Oi I N
atGas/NGL
Coal
-
ed
Subtotal
Elect 'y
Total
Ministry
INDUSTRY
Chemicals( total )
19.31
54.81
74.12
35.07
109.20
128.90
Neat
17.38
49.33
66.71
66.71
Motive
0.00
4.56
4.56
Other
1.93
5.48
7.41
28.06
35.47
Lights
0.00
2.46
2.46
Iron/SteeKtotal)
21.73
65.75
202.44
289.91
41.76
331.67
423.70
Heat
18.90
57.20
176.12
252.22
252.22
Motive
0.00
31.74
31.74
Other
2.82
8.55
26.32
37.69
6.68
44.37
Lights
0.00
3.34
3.34
Cement(total)
5.98
2.56
27.76
36.31
4.13
40.43
58.70
Heat
5.38
2.31
24.99
32.68
32.68
Mot i ve
0.00
3.34
3.34
Other
0.60
0.26
2.78
3.63
0.41
4.04
Lights
0.00
0.37
0.37
Pulp/Paper( total)
9.97
58.52
2.56
102
.80
173.84
40.86
214.70
217.30
Heat
8.97
52.66
2.31
92
.52
156.46
156.46
Motive
0.00
38.82
38.82
Other
1.00
5.85
0.26
10
.28
17.38
17.38
Lights
0.00
2.04
2.04
Other(total)
77.17
365.05
20.22
0.
,00
462.44
129.14
591.57
556.20
Heat
69.45
328.55
18.20
416.19
416.19
Mot i ve
0.00
104.60
104.60
Other
7.72
36.51
2.02
46.24
12.91
59.16
Lights
0.00
11.62
11.62
Total
134.15
546.69
252.98
102.80
1036.62
250.96
1287.58 1384.80
Assumptions:
Fossil fuels are 90X heat and 10X other.
Electricity is 76X motive, 16X other and 8X lights except for:
Chemicals which is 80X other (electrolysis), 13X motive and 7X lights.
Pulp and Paper which is 95X motive and 5X lights.
135
Table 1d 2005 Energy Consumption Projections with Efficiency Measures (Petajoules)
Oil NatGas/NGL
Coal
Wood
INDUSTRY
Chemicals
Heat
Motive
Other
Lights
Total
Iron/Steel
Heat
Motive
Other
Lights
Total
Cement
Heat
Motive
Other
Lights
Total
Pulp/Paper
Heat
Motive
Other
Lights
Total
Other
Heat
Motive
Other
Lights
Total
Total
13.3^
37.85
1.80
5.10
15.13
42.95
0.00
15.00
45.40
169.44
2.02
6.11
18.83
17.02
51.51
188.27
4.13
1.77
20.80
0.56
0.24
2.58
A. 69
2.01
23.38
6.88
40.41
2.15
0.93
5.44
0.24
7.81
45.85
2.38
53.29
252.08
16.92
7.18
33.95
1.88
60.46
286.03
18.80
105.11
428.35
232.83
0.00
0.00
0.00
86.04
9.56
95.60
0.00
95.60
Subtotal
51.18
0.00
6.89
0.00
58.08
229.84
0.00
26.96
0.00
256.81
26.70
0.00
3.38
0.00
30.07
135.47
0.00
16.17
0.00
322.29
0.00
43.01
0.00
365.29
710.25
Elect'y
3.92
26.10
1.34
31.35
27.29
6.21
1.82
35.33
2.70
0.61
0.18
3.49
33.38
1.11
34.50
84.40
19.22
5.63
109.25
213.92
Total Ministry
128.90
51.18
3.92
32.99
1.34
89.43
229.84
27.29
33.18
1.82
292.13
26.70
2.70
3.99
0.18
33.57
135.47
33.38
16.17
1.11
34.50
322.29
84.40
62.22
5.63
474.54
423.70
58.70
217.30
556.20
924.17 1384.80
Assumptions:
Efficiency Improvements
Heat recovery (25X reduction of all non-coal heat)
Motive Power (20X improvement)
House Keeping (10X reduction on everything)
Lighting (65X reduction in lighting)
Cement (25X coal reduction -heat recovery and fuel sub.)
Penetration Rate
0.83 70X
0.86 70X
0.93 70X
0.55 70X
0.90 70X
Net Improvement
17X
14X
7X
46X
11X
136
Table If 2005 Energy Consumption Projections with Added Fuel Switching (Petejoules)
Oil NatGas/NGL Coal Wood Subtotal Elect'y Total Ministry
DUSTRY
Chemicals 128.90
Heat 13.3- 37.85 51.18 51.18
Motive 0.00 3.92 3.92
Othe- 1.80 5.10 6.89 26.10 32.99
. ights 0.00 1.34 1.34
Total 15.13 42.95 0.00 0.00 58.08 31.35 89.43
Iron/Steel 423.70
Neat 15.00 45.40 160.97 221.37 221.37
Motive 0.00 27.29 27.29
Other 2.02 6.11 17.89 26.02 6.21 32.23
Lights 0.00 1.82 1.82
Total 17.02 51.51 178.86 0.00 247.39 35.33 282.72
Cement 58.70
Heat 4.13 1.77 20.80 26.70 26.70
Motive 0.00 2.70 2.70
Other 0.56 0.24 2.58 3.38 0.61 3.99
Lights 0.00 0.18 0.18
Total 4.69 2.01 23.38 0.00 30.07 3.49 33.57
Pulp/Paper 217.30
Heat 6.88 40.41 2.15 86.04 135.47 135.47
Motive 0.00 33.38 33.38
Other 0.93 5.44 0.24 9.56 16.17 0.00 16.17
Lights 0.00 1.11 1.11
Total 7.81 45.85 2.38 95.60 34.50 186.14
Other 556.20
Heat 53.29 252.08 16.92 322.29 322.29
Motive 0.00 84.40 84.40
Other 7.18 33.95 1.88 43.01 19.22 62.22
Lights 0.00 5.63 5.63
Total 60.46 286.03 18.80 0.00 365.29 109.25 474.54
Total 105.11 428.35 223.42 95.60 700.84 213.92 1066.40 1384.80
sumptions: N.B. COGENERATION IS INCLUDED IN ELECTRICITY SECTION, NOT INDUSTRIAL, THEREFORE NO EFFECTS ASSUMED.
uel Switching is Dased on Acres Report of 65 PJ of current economic potential
n the industrial sector, 35 percent of 1988 electricity (27X of 2005 Forecast Demand).
lost cogen. in paper and chemicals, therefore lower percent increase in gas in other industries.
Cogeneration (wood waste used for cogen. in pulp and paper) 1.00
(45X increase in natural gas heat in chemicals) 1.00
(20X average increase in gas heat in other industries) 1.00
(27X reduction in electricity) 1.00
Coal Injection in Steel Industry (5X reduction in coal-based C02) 0.95
137
Table 1f 2005 Energy Consumption Projections with Renewable Energy (Petajoules)
Wood Subtotal Elect'y Total Ministry
Oil NatGas/NGL
Coal
INDUSTRY
Chemicals
Heat
Mot i ve
0thc-
Lights
Total
Iron/Steel
Heat
Motive
Other
Lights
Total
Cement
Heat
Motive
Other
Lights
Total
Pulp/Paper
Heat
Motive
Other
Lights
Total
Other
Heat
Motive
Other
Lights
Total
Total
13.54
37.85
1.80
5.10
15.13
42.95
0.00
15.00
45.40
160.97
2.02
6.11
17.89
17.02
51.51
178.86
A. 13
1.77
20.80
0.56
0.24
2.58
4.69
2.01
23.38
6.88
40.41
2.15
0.93
5.44
0.24
7.81
45.85
2.38
53.29
252.08
16.92
7.18
33.95
1.88
60.46
286.03
18.80
105.11
428.35
223.42
51.18
51.18
0.00
3.92
3.92
6.89
26.10
32.99
0.00
1.34
1 .34
0.00
58.08
31.35
89.43
221.37
221.37
0.00
27.29
27.29
26.02
6.21
32.23
0.00
1.82
1.82
0.00
247.39
35.33
282 . 72
26.70
26.70
0.00
2.70
2.70
3.38
0.61
3.99
0.00
0.18
0.18
0.00
30.07
3.49
33.57
0.00
49.43
49.43
0.00
33.38
33.38
0.00
6.61
0.00
6.61
0.00
1.11
1.11
0.00
34.50
90.54
322.29
322.29
0.00
84.40
84.40
43.01
19.22
62.22
0.00
5.63
5.63
0.00
365.29
109.25
474.54
0.00
700.84
213.92
970.80
128.90
423.70
58.70
217.30
556.20
1384.80
Assumptions:
Renewable Resources
Sustainable forestry practices are adopted so
that all wood waste emissions are offset through reforestation.
138
Industry Model
>ie 1g 2005 C02 Projections (Kilotonnes)
Oil atGas NGL
Coal
Wood Subtotal Elect'y
Total
1988
lemicals
19.31
5481
74.12
35.07
109.20
Heat
981 49
1881.10
286258
2862.58
Ao\<ve
0.00
97.57
97.57
Dther
132.19
253.35
385.53
649.34
1034.87
.ights
0.00
33.30
33.30
Dtal
1113.67
2134.44
0.00
0.00
3248 12
78021
4028.32
4624.00
3P Steel
21.78
65.92
21488
302.59
33.03
33562
Heat
1104.17
2256.34
14326.34
17686.86
17686.86
Motive
0.00
679.18
679.18
Other
148.71
303.88
1591.82
2044.41
154.62
2199 03
.pghts
0.00
45.31
45.31
Dtal
1252.88
2560.23
15918.16
0.00
19731.27
879.11
20610.38
20034.00
ement
5.98
2.56
27.76
36.31
4.13
40.43
Heat
303.91
87.95
1851.02
2242.88
2242.88
Motive
0.00
67.15
67.15
Other
40.93
11.85
49.49
102.27
1529
117.56
eights
0.00
4.48
4.48
otal
344.84
99.80
1900.51
0.00
2345.15
86.92
2432.07
2333.00
■w id Paper
9.97
58 52
2.56
102.80
173.84
40.86
214.70
Heat
506.52
2008.24
190.91
0.00
2705.66
2705.66
Motive
0.00
830.72
830.72
Other
68.22
270.47
21.21
0.00
359.90
0.00
359.90
Lights
0.00
27.71
27.71
otal
574.73
2278.71
212.12
0.00
3065.56
85842
3923.99
11914.00
ther
77.17
365.05
20.22
0.00
462.44
129.14
591.57
Heat
3921.88
12528.28
1506.06
17956.21
17956.21
Motive
0.00
2100.24
2100.24
Other
528.20
1687.31
167.34
2382.85
478.14
2860.99
Lights
0.00
140.10
140.10
ota
4450.08
14215.59
1673.40
0.00
20339.06
2718.48
23057.54
24402.00
otal
7736.21
21288.77
19704.19
0.00
48729.17
5323.14
54052.30
63307.00
lotonne C02 per
PJ
HI
73.60
las
49.70
;oal
89.00
lee.
2488347
/ood
100.00
lOJECTED C02
54052 Kilotonnes
88 ACTUAL CO:
63307 Kilotonnes
-14.6%
139
Table 2 Industrial Electricity Demand Forecast
•1988 Actual
•2005 Ministry Forecast
•2005 At 2.U Growth, no
•2005 with Efficiency Me
Uti lity
Cogen
Total
X Change from 1988
*
HO. 20
30.00
170.20
•
254.30
45.40
299.70
76X
•
199.08
42.60
241.68
42X
•
213.92
65.00
278.92
64X
•
APPENDIX E— TRANSPORTATION SECTOR
Economically achievable CO; emissions reductions from passenger automobile use
were computed using the Ministry of Energy's projections for growth in passenger vehicles
and distance travelled, but modified to include more aggressive assumptions about fuel econ-
omy and substitution of natural gas and ethanol for gasoline and diesel fuel. In addition, a 15
percent modal shift from autos to public transit in the Greater Toronto Area (GTA) was simu-
lated using data from the Transportation Tomorrow Survey, Travel Survey Summary for the
Greater Toronto Area, University of Toronto (June 1989), modified in a spreadsheet with
travel growth projections from the Metro Planning Department. Information about TTC vehicle
and passenger travel, as well as energy use, was obtained from the TTC.
The economically achievable measured assumed to reduce CO? emissions from passen-
ger vehicles include the following:
FUEL ECONOMY OF TRANSPORTATION:
•Bv 2005 average on-road auto stock efficiency improves
from 11.39L/100kmin 1988 to 6.7 L/100 km
•By 1994 gas guzzler/sipper rebate programme (DRIVE+)
aims to achieve average new car provincial fleet economy of 5.8 L/100 km
•In 2000-2005 the gas guzzler/sipper rebate programme aims
to achieve annual improvement in new car provincial
average fuel economy of 5-6% p.a.
•Provincial and Metro policies encourage significant
investment and expansion in public transit to achieve
bv 2005 modal shift from autos to public transit in GTA of 15%
SWITCHING TO NATURAL GAS:
•Policies encourage strong iniuauve by gas industry and
utilities and auto industry to encourage natural gas vehicles,
aiming by 2005 at percentage of passenger cars fueled of 10%
RENEWABLE FUEL:
•Policies aim to encourage use of ethanol blend for
auto fleet, aiming by 2005 at percentage of gasoline
passenger cars fueled of ^"c
•R&D aims to commercialize production of ethanol from
lignocellulose so that no net CO2 emissions occur from its use by the year 2005
With respect to the GTA modal shift simulation, the following assumptions were made
in the spreadsheet analysis:
• Load factor— no change in load factor occur, remaining at 1.468 (urban) and 1.657
(average) in 2005:
• Average trip length— annual average kilometres travelled per vehicle declines by .2 per-
cent annually, per the Ministry of Energy's assumptions, and is reflected in a similar
decline in average trip length;
• Modal split— by 2005 the modal share of automobile travel declines from 72 percent to
57 percent in the GTA, due to land use reforms and a significant expansion in public
transit Public transit ndership increases by 4.1 billion passenger-kilometres, approxi-
mately equivalent to the TTCs total ndership in 1988, leading to a six percent decline
in total vehicle kilometres travelled in 2005 from the base projecnon (See Tables E-l-to-
E-2)
141
The results of the spreadsheet analysis are shown in Tables E-3 and E-4; they are di-
vided into three scenarios: an efficiency scenario that includes fuel economy improvements and
the modal switch to public transit in the GTA; a fuel substitution scenario that switches 10 per-
cent of passenger cars to natural gas; a renewable scenario that assumes the ethanol blend.
Table E-5 summarizes the estimates, which project a total 33 percent reduction in CO;
emissions from 1988 levels for passenger vehicle use by 2005.
Table E-5: Summary of C02 Reduction Measures
Year Measure Energy C02 CO, In- %
applied use CO: change crement change
PJ Mt Ml Ml from 1988
Ministry of Energy:
1988 Base 295 20.0 - - -
2005 Projection 366 24.9 +4.9 +4.9 +25%
Scenarios:
2005 (i) Fuel economy 237 16.1 -3.9 -3.9 -20%
2005 plus 15% modal shirt 223 15.2 -4.8 -0.9 -24%
2005 (ii) Fuel switch (natural gas) 223 14.8 -5.2 -0.4 -26%
2005 (iii) Renewable (ethanol) 223 13.5 -6.5 -1.3 -33%
In order to accurately estimate total CO; emissions from the measures described, it is
necessary to take into account passengers from automobiles shifted to public transit. In order to
make such an estimate, data from the TTC was collected and analyzed to determine emissions.
For sake of simplicity, it is assumed the operation of the TTC would have to double to accom-
modate these new passengers (in fact the TTC does not operate in the outlying GTA areas). In
1988, TTCs total emissions were about .24 Mt (see Table E-6). If these emissions were to
double, then total net CO; emissions from personal travel would be about 13.75 Mt, a reduc-
tion of 31 percent from 1988 levels.
In sum, the modal shift of 15 percent from autos to public transit in the GTA reduces
passenger auto travelled by about 4.1 billion kilometres. The reduction in emissions of 1.1 Mt
CO; is partially offset by an increase in public transit emissions of about .24 Mt, reflecting the
fact that automobile travel (in 2005) is 4-to-5 times more carbon intensive per passenger kilo-
metre when compared with public transit (in 1988).
Table E-6: Estimate of TTC C02 Emissions, 1988
Vehicle
Total
Energy
C02
Energy
C02
VKT
use
emissions
Intensity
Intensity
km
PJ
Mt
PJ/
pass-km
Mt
pass-km
Diesel buses
100,117,000
2.2
0.17
1.29
99
Trolley buses
5,281,000
0.05
0.00
0.40
28
Streetcars
13,866,000
0 15
0.01
0.31
22
Subway
72,209,000
0 73
0.05
0.49
35
SRT
2.343,000
0.03
0.00
1.33
93
TOTAL
193,816,000
3 16
0.24
0 83
62
142
2005
2005
1988
(base)
(modal)
17.1
15.1
11 1
4.7
5 4
4.0
5.0
7.4
5.5
7.0
9.7
7.2
4.0
4.9
3.6
4 2
4.8
3.5
41.9
47.2
35.0
Table E-1: Estimate of GTA Vehicle Kilometres Travelled (weekdays)
Metro
Durham
York
Peel
Halton
Hamilton
Total Daily VKT (millions)
Total VKT (billions) 10.9 12.3 9.1
Table E-2: Vehicle Mileage Forecast
Total VKT GTA VKT only
1988 74,280.000,000 10,902,000000
2005 (base) 102,430,000,000 12,272,000,000
2005 (modal) 96,488,000,000 9,089,000,000
143
Table E-3: Energy Use by Passenger Vehicles, 1988-2005
Natural
Total Diesel Gas NGLs gas Ethanol
1988
Inter-city 99.00 0.70 98.30 0 00 0.00 0.00
Urban 196.10 1.20 186.40 8.10 0 40 0.00
TOTAL 295 10 1.90 284.70 8.10 0.40 0.00
2005, Base projection
Inter-city 122.90 5.6 117.3 0 0 0
Urban 242.90 9.1 .222.1 8.2 3.5 0
TOTAL 365.80 14.70 339.40 8.20 3.50 0.00
2005, Fuel economy and GTA modal shift
Inter-city 74.94 3.41 71.53 0.00 0.00 0.00
Urban 148.12 5.55 135.43 5.00 2.13 0.00
TOTAL 223.06 8.96 206.96 5.00 2.13 0.00
2005, Natural gas fuel substitu-
tion
Inter-city 74.94
3.07
64.38
0.00
7.49
0.00
Urban 148.12
4.99
121.89
5.00
16.23
0.00
TOTAL 223.06
8.07
186.27
5.00
23.73
0.00
2005, Conversion
to ethanol blend
Inter-city 74.94
3.07
57 94
0.00
7.49
6.44
Urban 148.12
4.99
109.70
5.00
16.23
12.19
TOTAL 223.06
8.07
167.64
5.00
23.73
18.63
l 44
Table E-4: C02 Emissions from Passenger Vehicle Use,
1 988-2005
Natural
Total Dlaaal Gaa NGLs gas Ethanol
1988 0
Inter-city 6.74 0.05 6 68 0.00 0 00 0.00
Urban 13 27 0.09 12.67 0 48 0.02
TOTAL 20.00 0.15 19 35 0.48 0 02 0.00
2005, Base projection
Inter-city 8 40 0 43 7.97 0.00 0.00 0.00
Urban 16 46 0.70 15.10 0.49 0.17 0.00
TOTAL 24 87 1 13 23.07 0 49 0 17 0.00
2005, Fuel economy and GTA modal shift
Inter-city 5.13 0.26 4.86 0.00 0.00 0.00
Urban 10.04 0.43 9 21 0.30 0.11 0.00
TOTAL 15.16 0.69 14.07 0.30 0.11 0.00
2005, Natural gas fuel substitu-
tion
Inter-city 4.98 0 24 4.38 0.00 0.37 0.00
Urban 9 77 0.38 8.29 0.30 0.80 0.00
TOTAL 14.76 0.62 12.66 0.30 1.17 0.00
2005, Conversion to ethanol blend
Inter-city 4 55 0.24 3.94 0.00 0.37 0.00
Urban 8 94 0.38 7.46 0.30 0.80 0.00
TOTAL 13.49 0 62 11.40 0.30 1.17 0.00
145
APPENDIX F— ELECTRICITY GENERATION
Because electricity is consumed to a significant extent in all end-use sectors except for
transportation, the CO; emission rate of electricity generation — grams of CO; emitted per kWh
of secondary energy consumed — plays a determining role in the provinces overall emissions.
Electricity generation accounted for about 20 percent of the Ontario's CO; emissions in
1988, mostly produced by Ontario Hydro's coal fired plants, which typically supply 50-75
percent of the province's peak energy demand. Coal fired power overall accounted for about 25
percent of the electricity consumed in the province in 1988. The CO; emission rate for sec-
ondary energy demand was 252 grams/kWh or .069 Mt/PJ in 1988.
The Ministry of Energy forecasts electricity demand will rise 55 percent from 1988 to
2005, compared with a 24 percent rise in overall secondary energy demand. Since much of the
new demand, in the Ministry's projections, will be met by new hydro, nuclear, and natural gas
cogeneration capacity, the role of coal in the fuel mix will diminish by 2005, causing the CO;
emissions rate of electricity generation to fall more than half to 121 g/kWh or .03 Mt/PJ.
As a result of the measures outlined in Appendices B-E, however, provincial electricity
demand increases from 465 PJ in 1988 to 609 PJ in 2005, an increase of 31 percent (see Table
F-l). The calculation of energy use in 1988 does not include the "other" category in the com-
mercial sector, which is not covered by the report's analysis, but the "other" category is in-
cluded in the estimate for 2005. The calculation for 2005 was made by assuming the "other"
category accounts for the same proportion of energy use in 2005 as in the Ministry of Energy's
1988 inventory. Hence, the total energy demand in 2005 would be about 609 PJ, which is
used as the basis for the fuel mix described in Table F-2.
Table F-l:Change In Electricity Demand, 1988-2005
1988 1988' 2005 2005' Change
PJ PJ PJ PJ %
Residential 153.47 167.27 113.94 123 97 -26%
Commercial 95.04 103.59 164.95 179.46 74%
Transportation 1.30 1.42 2 30 2.50 77%
Industry 177.00 192.91 278.92 303 46 57%
Sub-total 426.81 465 18 560 11 609.40 31%
Own uses/losses 38.37 0.00 49 29 0.00
Total 465 18 465.18 609.40 609.40 31%
"In this column own uses/losses are factored proportionately into each sector.
The implications for the fuel mix and CO; emission rate in 2005 are significant.
Assuming Ontario Hydro proceeds with the purchase of of electricity from Manitoba and the
economic potential of 3,800 MW of new parallel generation is reached, there is no need for
new nuclear units beyond Darlington A, other new non-fossil capacity, or new natural gas-
fired combustion turbine units. Furthermore, the need for coal-fired generation is reduced from
73 PJ (in the Ministry's projections) to 41 PJ. Coal-tired generation declines from about 25
percent of the province's total generation mix in 1988 to seven percent in 2005. Under this
scenario, the Manitoba purchase, natural gas parallel generation, and new hydraulic, such as
upgrading the station at Niagara Falls, meets increased demand, displacing coal-fired genera-
tion. As a result, electricity's CO; emission rate declines to 90 g/kWh or .025 Mt/PJ. 77m rate
is used to calculate 2005 C02 emissions from electricity in Appendices B-E.
145
Table F-2: Electricity
Forecast
, Fuel
Mix and
C02 Emissions, 2005
Cap-
Con-
acity
Output
Output
version
Input
C02
MW
factor
GWh
PJ
efficiency
PJ
MT
Manitoba Purchase
1000
80%
7008
25 23
34%
73.57
0.00
Non-utility generation
33312
119.92
55%
219
8.68
Existing parallel:
5574
20.07
42%
48
0 71
hydraulic
3345
12 04
34%
35.12
0.00
coal
197
0 71
34%
2.09
0.19
ol
160
0.58
34%
1.69
0.13
natural gas
1727
6.22
80%
7.77
0.38
other
145
0.52
34%
1.54
0.00
New parallel:
27738
99.86
59%
170
7.97
hydraulic
200
50%
876
3.15
34%
9.20
0.00
natural gas cogen
3833
80%
26862
96.70
60%
161.17
7.97
Ontario Hydro
128944
464
34%
1352
5.26
Existing nuclear
12402
68%
73333
264.00
34%
76990
0.00
Darlington A units
1762
80%
12348
44.45
34%
129.64
0.00
Hydraulic old + new
7596
56%
37263
134.15
34%
391 21
0.00
Coal:
6000
21.60
35%
61.71
5.26
Pulverized coal
5000
18.00
35%
51.43
4.75
Natural gas co-firing
1000
3.60
35%
10.29
0.51
TOTALS
169264
609
37%
1645
13.94
Natural gas is assumed to be co-fired with pulverized coal, replacing 20 percent of the
coal on an energy basis. A "clean coal retrofit technology" developed in the United States by
the Gas Research Institute and now reaching commercialization, natural gas co-firing not only
lowers CO; emissions but sulphur dioxide emissions as well, by 20-30 percent. Co-firing
would allow an extra margin of safety under the province's acid rain pact with Ontario Hydro.
Given the estimates in Table F-2, a total of 29,000 GWh of nuclear and coal capacity
would be available for Ontario Hydro's "reserve margin", about 18 percent of the total. While
this falls within the range accepted among U.S. utilities for adequate reserve, it falls short of
Ontario Hydro's assumption concerning its need for a 24 percent reserve margin in its
Demand-Supply Plan. Meeting that target would require another 10,000 GWh of capacity, re-
quiring about 1,500 MW operating at 80 percent capacity. Such capacity could be met by addi-
tional load following parallel generation. The technical potential exists, and higher buy-back
rates would no doubt make such potential more economic. If developed, Ontario Hydro's coal
stations could be put in reserve, thus reducing the CO; emission rate of electricity even further.
The electricity forecast for 2005 would not look much different were the government
solely trying to achieve the goals of the nuclear moratorium by eliminating need for new nu-
clear capacity beyond the new Darlington B units. Ontario Hydro might opt for less new paral-
lel generation and new combustion turbine units. Reliance on coal-fired stations might be
greater, and the co-firing option would probably not be explored at these sites. Achieving re-
ductions in CO;, however, compels an even more assertive effort to realize the economic po-
tential of parallel generation than might be required only under the nuclear moratorium. One
additional benefit to CO; reduction would be the avoidance of billions in dollars of capital costs
to install scrubbers to control acid gas emissions from coal-fired power stations. Retrofitting
co-firing technology on coal boilers would require less capital investment, than scrubbers.
146
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